E&Y expert Ayush Moodgal clears key doubts about GST in events

Registration

GST registration is required to be taken by companies having annual turnover of INR 20 lakh or above. People below the threshold of INR 20 lakhs need not necessarily be registered. States like Himachal Pradesh, Uttrakhand and North Eastern states have a threshold of Rs.10 lakhs. However if the business is making inter-State supplies then no threshold is applicable and registration is mandatory.

State-wise registration and compliances

Companies operating in more than one state are required to take registration in each of the States separately. This is in stark contrast to the erstwhile service tax regime, where service providers like event management companies were required to take a single centralized registration for their pan India operations. Further, only 2 half yearly service tax returns were required to be filed. State wise registration under GST also implies filing multiple State wise GST returns on a monthly basis. Under GST, three monthly returns are required to be filed by a taxpayer. BY 10th of next month, the taxpayer has to file invoice-wise details of outward supplies. By 15th of next month, the taxpayer has to file invoice-wise details of inward supplies, and by 20th of the next month, the consolidated monthly return has to be filed. Thus, for a single GST registration, 36 monthly returns have to be filed and 1 annual return has to be filed. This is a significant impact for service providers in terms of increase in compliances.

Tracking of place of supply 

Under service tax regime, there was a single service tax rate of 15% which was applicable on all domestic transactions, and there was no requirement to track the place of supply of each domestic transaction. Under GST we need to track the place of supply for each and every transaction to determine whether the transaction is intra-State (which would mean that it would be liable to Central GST plus State GST), or whether it is inter-State (which would mean that it would be liable to Integrated GST). In case of event related services, the place of supply rule is that when the services are provided to a GST registered customer, i.e. a business, then the place of supply is location of the business customer. However, where the services are provided to an individual customer (i.e. B2C supplies), then the location where the event is held is the place of supply. Thus, event management companies would need to track the place of supply for both B2B and B2C supplies separately, and charge the GST accordingly.

Procurement from unregistered dealers

While organizing an event, there will be lot of procurements from unregistered people such as small artists and freelancers. These transactions stayed outside the tax net under the Service Tax regime. However, under the GST regime, tax would need to be paid by the event management company under the reverse charge mechanism. Further, an invoice would need to be raised on self by the event management company. While this tax paid would be available as an input credit and hence would not be a cost, there would be the administrative hassle of doing the compliances like paying tax, raising self-invoice etc.

Blockage of input credit

When event organizers are organizing events in States where they don’t have an office, there could be chances of credit blockages that would lead to increase in cost of organizing the event. For example, if an event organizer based in Delhi organizes an event in Goa, and books a hotel in Goa for the event. In that case, the hotel should treat his service as an intra-State service to the event organizer and charge a Central GST plus local Goa GST (since the hotel’s place of supply would be the location of the hotel which is Goa). Since the event organizer does not have a registration in Goa, the aforesaid GST charged by the hotel would become a cost for the event organizer. Thus, event organizers should explore the option of opening offices at locations where a big chunk of events are held so that there are no increase in costs on this account.

Sponsorship 

Procuring sponsorships for the events is an important aspect for event planners. However, a point to be noted is that sponsorship services are liable to GST under reverse charge mechanism. This means that the sponsor is required to pay GST on this transaction, and not the company earning the sponsorship income. Thus, sponsorship contracts should be drafted carefully to clearly identify the nature of transaction as sponsorship so that it is clear that the liability is on the sponsor and not the event organizer.