Sponsorship recd. will service tax apply ?

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 November 2010 X event management firm is organising a live concert for which it has received a sponsorship of Rs.10 lakhs from a real estate developer & other corporate houses.

What is the effect of service tax on this ?
Can the firm ask the corporates to pay service tax,if applicable ?

CA.Madhusudan B.P.

CA.Madhusudan B.P. (Expert)
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08 November 2010 It is not can, It should be, otherwise you will have to incur the service tax amount from your pocket.
Grossing up concept or reverse working shall be done. If you bill Rs10lakhs only without Service tax component & payment received in full Rs.10 lakhs (Including TDS amount) then the amount of Service tax liability would be calculated as follows
ST = (10 lakhs * Service tax rate)/100 + Service tax rate.

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