Hike in service tax irks event managers

Roping in an international company to sponsor events is expected to pinch event management companies more after this year's Budget.

Under the new service tax provisions, event management companies will have to pay a service tax of 12. 36 per cent to the international company which sponsors any non-sports event.

Sabbas Joseph, founder director, Wizcraft International Entertainment, said the move was likely to have a negative impact on sponsorships by international companies which may prefer other avenues of sponsorship or brand-building.

Venkat Vardhan, managing director, DNA Networks, event management firm, said, "The tax burden is high as the service tax is charged on the entire amount of the sponsorship, unlike ad agencies where it is charged only on the commission earned," said Vardhan.

Jayraj Sheth, director, BSR & Co, a tax consultancy firm, said under the new provisions, the scope of services, which can be taxed under event management, has been widened.

With event management companies likely to pass on the extra charge to the companies, this may result in a fall in sponsorships for cultural and non-sports events. On the other hand, these firms may opt for higher participation in sporting events or use media like print where there is no service charge levied at present.