And that leaves a few issues un-answered
From 1st May if a cola company sponsors any event by supplying free cool drinks, he will not only pay central excise duty but also service tax on the money consideration of this non-money transaction (in terms of new service tax valuation ) . Certainly it will add to the fizz.
Can the Body corporate or firm take credit on such payment made as person receiver? Yes. They can take credit. Though it is not an output service, but certainly it is an input service used for sales promotion (covered under inclusive clause of definition of input service). And also because the challan evidencing such payment (under Rule 2(d)(vii) ) is mentioned as one of the document for taking credit under Rule 9 of Cenvat Credit Rules. But then tax is paid by the recipient. Then who takes the credit?
Can this service tax be paid through credit ? Don’t ask such foolish questions. Recently DGST has clarified that GTA Service Tax cannot be paid through credit, but why???????????????
The taxable service as per Sec.105(zzn) is : Taxable service means any service provided (or to be provided ) to any body corporate or firm by any person receiving sponsorship in relation to such sponsorship, in any manner , but does not include services in relation to sponsoring of sports events
The new inserted rule under Rule 2(d)(ii) reads as follows:
“(vii) in relation to sponsorship service provided to any body corporate or firm, the body corporate or firm, as the case may be, who receives such sponsorship service;”.
Now a doubt arises as to who received sponsorship service, whether the person conducting the event or persons sponsoring the event.