14 April 2015 14:06:29 IST

Service tax may play spoilsport; IPL tickets will cost more

Tickets for watching Indian Premier League (IPL) cricket matches will get costlier, as they will now attract service tax

The Budget has raised the service tax rate from 12.36 per cent (including education cess) to 14 per cent. The new rate will come into effect after the Finance Bill is enacted. The Government has also decided to levy higher service tax on business class air travel making it more expensive.

However, on many of the services, the effective rate of service tax will come down because of abatement — the customer will not be required to pay tax on the entire bill amount, but only on the charges levied for services.

While pruning the Negative List (which provides details of services that will not be taxed), the Budget talks about levying service tax on “admission to sporting events other than the recognised sporting event, if the amount charged is more than Rs 500 for right to admission to such an event.”

The Tax Department has defined recognised sporting event as any sporting event which has been organised by a recognised sports body where the participating team or individual represent any district, state, zone or country. Though IPL cricket is organised by a recognised body, the participating teams are franchisees and represent a commercial entity. Individual players do not represent any district, State, zone or country.

A senior tax official clarified that service tax will be levied on a part of the ticket price. This year, IPL starts from April 8. Service tax will be levied on such events only when tax authorities notify the dates once the Finance Bill 2015 gets enacted.

Air Travel

The new service tax structure has widened the gap between air travel by economy and business class. At present, air fare for any class attracts service tax with the same rate of abatement. This means, service tax is levied only on 40 per cent of the fare which translates the effective rate of tax (including education cess) to little less than 5 per cent.

Now, service tax on economy class tickets will continue to be levied at 40 per cent of fare, while for business class, it would be payable on 60 per cent of the value of such higher classes. This new structure will come into effect from April 1. Change in service tax norms has also cleared the air on radio taxis service provided through only mobile application, such as Uber. A communication by the Tax Department said that in respect of any service provided under aggregator model, the aggregator, or any of his representative office located in India, is being made liable to pay service tax, if the service so provided uses the brand name of the aggregator in any manner.

Apps-based taxi services

Aggregator refers to a technical platform where customers are connected with the service providers. For example, Uber apps connect people with drivers and in returns get some part of payment made by the customer. It offers services in 10 Indian cities including Ahmedabad, Chandigarh, Jaipur and Kolkata.