Luxury, Entertainment or Sports: How Will Government Tax IPL Tickets in GST 2.0?

The Indian Premier League (IPL) is one of India’s most celebrated sporting events since its launch in 2008. For some cricket fans, it's the year’s biggest sporting event; for others, it's pure entertainment. And for many, watching their favourite teams play live is a luxury they cherish. But whether the government views it as an entertainment, sport, sin or luxury is likely to be answered in the center's upcoming goods and services tax (GST) reforms. 

The purpose of the government’s view is for taxation. IPL tickets, which currently attract 28% GST, are likely to be put in the proposed 18% slab. Paras Nath, partner at audit firm T R Chadha & Co., told Outlook Business that, given the kind of fan following IPL has both nationally and internationally, the event shouldn’t be categorised as sin or luxury but rather be looked at as a form of entertainment. 

“IPL is a form of entertainment, and it attracts a lot many viewers not only from India but across the globe. Such an entertaining and marquee event in my view is neither a luxury nor a sin and therefore, the government should keep it at 18% and not under the bracket of 40%,” Nath said.

The Narendra Modi-led government has planned to reform GST after nearly eight years of its introduction. The centre has proposed to reduce tax slabs from the present four to two. Under the present regime, there are four tax slabs, including 5, 12, 18 and 28%. The government is planning to rationalise these into a two-tier structure of 5 and 18% along with a 40% special slab for luxury and sin goods. 

The special 40% GST rate is proposed to be levied on several sin and luxury goods, including tobacco, luxury cars, online gambling or gaming, and caffeinated beverages. 

Rahul Shekhar, Partner, Indirect Tax, Nangia Andersen India, told Outlook Business that presently, the IPL tickets are kept in the highest GST slab mainly because the government views it as commercial entertainment and not just a sporting activity. The government’s reasoning behind it is to impose higher taxes on commercial entertainment. 

“For tax purposes, the government classifies the IPL as a commercial entertainment event rather than a sporting activity,” Shekhar said. “The policy approach is to impose higher taxes on commercial entertainment while differentiating it from initiatives aimed at promoting sports,” he added. 

While under the proposed tax structure, IPL tickets are likely to be kept in the 18% slab, experts have pointed out that the only case where the government can put it in the 40% bracket is to compensate for revenue loss due to shifting of goods to lower slabs. The government’s proposed move aims to shift 99% of the goods and services in the present 12% slab to 5% and 90% of the goods in the 28% slab to the 18% bracket. In that context, a recent report from the State Bank of India has projected that the centre’s GST reform could cost around ₹ 85,000 crore to the exchequer annually in taxes foregone. 

“The popularity, huge crowd at stadiums and millions of online viewers are willing to pay high to watch the matches!” Nath said. “This may be a good revenue source to compensate the hit of lowering the slab rates under GST 2.0. There shall not be any other reason to move this item to the 40% slab,” he added.