SERVICE TAX ON EVENT MANAGEMENT SERVICES
Service tax has been imposed on Event Management services with effect from 16th August, 2002, vide Notification No. 8/2002-ST, dated 1.8.2002. The gross amount charged to or total consideration received from a client by an event manager in relation to event management services shall be chargeable to service tax.
What is Event Management
Section 65(40) defines 'event management' as under —
"event management" means any service provided in relation to planning promotion, organising or presentation of any arts, entertainment, business, sports, marriage or any other event and includes any consultation provided in this regard.
Thus, as per Section 65(40), event management means any service provided in relation to planning, promotion, organising or presentation of any arts, entertainment, business, sports, marriage or any other event and includes any consultation provided in this regard. The services of event management should be provided on commercial basis.
The event management services would cover certain specific services in relation
(e) organizing, or
(f) presentation, of any of the following —
(v) marriage (w.e.f. 1-6-2007)
(vi) any other event
Amendments made by Finance Act, 2007 (w.e.f. 1-6-2007)
Finance Act, 2007 has amended the definition of event management so as to include marriage in the scope of the definition of event management. This will imply that 'marriage' as an event shall also now qualify as an event for service tax purpose. This has been specifically included in the definition as 'marriage' which was not getting covered under earlier expressions of arts, entertainment, business, sports or any other event. Now the organizing of marriage functions and management as well as consultancy in relation to event of marriage will be subject to levy of service tax.
Who is Event Manager
Section 65(41) defines 'event manager' as under —
"event manager" means any person who is engaged in providing any service in relation to event management in any manner.
Following two features are clear from this definition -
(i) event manager can be any person ie, natural or legal.
(ii) He must be engaged in providing services in any manner in relation to management of any event.
Section 65(105)(zu) defines taxable service to mean service provided or to be provided to any person by an event manager in relation to event management.
The basic tests for taxability of event management service are -
(a) Service must be provided to any person (w.e.f. 16-5-2008).
(b) Service must be in relation to event management.
(c) Service must be provided by event manager.
Replacement of 'client' with 'any person' (w.e.f. 16.5.2008)
Finance Act 2008 has substituted the words 'any person' for the word 'client' (w.e.f. 16.5.2008) as the service tax is levied on service and status of recipient of taxable service should not determine the tax treatment of a given service.
Following clarifications issued by CBEC vide Letter No. F. No. B-11/1/2002 TRU dated 1-8-2002, may be noted -
(a) An event manager is hired to execute an event such as product launch of any corporate, promotional activities, concerts/rock shows, official meets, award functions, beauty pageants, entertainment events, exhibitions, private functions and sports events etc. Event manager uses his expertise and ideas to manage an event. Event manager is supposed to manage a venue, sets including decoration of sets, mandap, chair, table barricades, sound, light video, electricals, security communications, invitations to the event/sale of tickets and publicity of the event. He also has to manage the stage show, artist, musician, choreographers and other miscellaneous items for holding of event. All services provided by the event manager are liable to service tax. This also covers any consultation provided for organising an event.
(b) For managing an event, the event manager hires the services of photographer, videographer, sound recording studio, advertising agency, mandap keeper and security agency. Service tax is already leviable on the amount paid to these agencies by the event manager.
(c) A point has been raised as to whether in the case where event is organized/managed in-house but certain contractors are appointed say for stages/mandap preparation, for lighting/sound system, for advertising the event etc. and revenue is generated by renting out the exhibition space and sale of ticket, whether service tax will be leviable on the amount charged by the contractors or on the amount generated by sale of space or tickets etc. CBEC has clarified that service tax is not on the event but on the service provided for managing an event. Therefore in a case where the event is organized/managed by the sponsor himself, no service tax is payable as "event management". However, the contractors who provide service as mandap keeper, videographer, security agency etc. are no doubt liable to pay service tax on their respective "taxable service". It has also clarified that service tax under the category of event management is not leviable on the sale proceeds of tickets or revenue generated from the sale of space.
In case of a firm or person who undertakes activities of organizing trade fairs and exhibitions soliciting the participation from the trade and industry and who provides space or furniture, fixtures, cabins, stalls, security, electricity etc. on a charge basis, there is no provision of taxable service. This is because service tax is not on the event as such but on the services provided for managing an event. It has been clarified vide Circular No. 68 dated
28-11-2003 that for occurrence of taxable event 'provision of event management service', there should be a sponsor at whose behest an event is organized and an event manager who organizes such services. Where the event is organized or managed by the sponsor himself, no service tax is payable under event management category. It leads to conclusion that for taxability of service, following three points are relevant —
(i) There has to be a sponsor.
(ii) There has to be an event manager.
(iii) Event should be managed/organized.
(Circular No. 68/17/2003 dated 28-11-2003)
Thus, for occurrence of a taxable event, there has to be a sponsor on whose behalf an event is organized and event manager who organizes such services. Service tax is not a tax on the event but on the services provided on managing an event. In case the event is organized/managed by the sponsor himself, no service tax is payable.
Event Management v. Business Exhibition
The services of event management and business exhibition are two separate services and should not be confused. CBEC has vide Circular No. 96/7/2007-ST dated 23.8.2007) (Para 41 clarified that trade fairs and exhibitions are organised by persons. Such organisers of trade fairs and exhibitions provide services to exhibitors in relation to business exhibition. Services provided by an organizer of trade fairs and exhibitions to an exhibitor in relation to business exhibition is liable to service tax under "Business Exhibition Service" [Section 65(105)(zzo)] w.e.f. 10.9.2004. In addition, an organiser of the trade fair or business exhibition may engage an event manager to provide service to the organiser in relation to organising trade fairs and exhibitions. In such cases, the event manager renders the service of "Event Management" to the organisers and is liable to pay service tax under "Event Management Service". The two services, namely "Business Exhibition Service" and "Event Management Service", and the two service providers of the respective services are distinct.
In CCE, Siliguri v. Mahabir International 2007 -TMI - 2789 - (CESTAT, KOLKATA), it was held that yoga classes conducted by a charitable trust is a charitable activity and as such appellant cannot be arbitrarily taxed on tickets.
In Phase I Events & Entertainment Pvt Ltd v. CST, Bangalore (2009) 116 STJ 45 ; (2008) 17 STT 74 (CESTAT, Bangalore), where the assessee organized an event for a Committee (association) of which he was member, it was held that assessee was not liable to pay service tax in absence of service provider - client relationship between assessee and Committee.
In CCE v Mahabir International (2008) 15 STT 487 (CESTAT, Kolkata), where a charitable trust organized yoga camp and entire money collected was given to a trust to support noble cause, it was held that such service could not be treated as an event management service and subjected to service tax.
In Hindustan Zinc Ltd v CCE, Jaipur -II 2009 -TMI - 76921 - (CESTAT, NEW DELHI), it was held that service tax credit of event management service in connection with celebration by employees on expansion of plant was not related to business or sale promotion and as such it was not eligible for credit.
Value of Taxable Service
On whether the amount paid by the event manager to such agencies will be includible in the value on which he is liable to pay service tax, CBEC has clarified that the taxable service is any service provided by the event manager in relation to management of event. Therefore, the gross amount charged by the event manager from the client for organizing the event is liable to be included in the value of the taxable service for the purpose of calculation of service tax. However, the event manager shall be entitled to the credit of service tax paid by the input service provider.
Any person engaged in providing event management services (event managers or organisations engaged therein) shall be liable to pay service tax and shall be treated as an assessee for service tax purposes.
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By: Dr. Sanjiv Agarwal - January 7, 2011