Central excise slaps Rs1.15 crore service tax notice on Yuvraj Singh

Central excise department has slapped a notice on cricketer Yuvraj Singh of Kings XI Punjab franchise seeking payment of service tax to the tune of Rs1.15 crore raised on his income from two seasons of IPL and endorsements.

Yuvraj's tax consultant, while refuting the claims of tax authorities, put the onus on IPL franchise KPH Dream, which owns Kings XI Punjab, for the payment of service tax for availing the cricketer's services in promotional activities during the IPL matches.

"We have served notice on Yuvraj Singh asking him to pay service tax amounting to Rs1.15 crore on money he earned from two IPL seasons and doing endorsements," a senior official of the Central excise department, Chandigarh region, said.

Serving the notice by including the income of Yuvraj under 'Business Auxiliary Services' head, the department has assessed the service tax amounting to Rs96.44 lakh from playing two seasons of IPL and Rs19.53 lakh from participating in the TV show Dus Ka Dum and engaging in promotional activities for two agencies — Cornerstone Sports and Rhiti Sports.

Central excise department has calculated an income of Rs8.51 crore from IPL matches, Rs99.99 lakh from winning Dus Ka Dum show last year and Rs65.30 lakh from promotional activities for two agencies, as per the notice.

The department had already served notices on three other IPL players VRV Singh, Sunny Sohal and Uday Kaul, asking them to pay tax of Rs11.33 lakh, Rs4.79 lakh and Rs4.53 lakh, respectively.

The decision to demand tax from cricket players follows the non-disclosure of break-up of earnings by them from IPL matches.

"Players were asked to give the break-up of their earnings from cricket matches and endorsements but they failed to provide us separate figures. Therefore, we have been forced to levy tax on their income, whether it is match fee earned by players from IPL-1 and IPL-II season, after assessing their income on individual basis," the official said.

Terming as unjustified the notice served by tax authorities, Yuvraj's tax consultant Raman Aggarwal said that the cricketer could not be held responsible for paying service tax for IPL matches.

"It was IPL franchise Kings XI Punjab which asked Yuvraj to participate in promotional activities and it was part of the agreement signed between both the parties. The department should ask Kings XI Punjab for payment of service tax," he said.

He said he would be filing a reply to the notice within 10-15 days.

Aggarwal asserted that since playing cricket was the core activity for a player while endorsements and promotional activities were incidental or ancillary, there could not be any segregation of money which a player earned from IPL event.

He said that according to an agreement between player and franchise, if a player could not participate in promotional activities then his 10 per cent of total fee could be retained by the franchise. "At the most, tax can be calculated on 10 per cent of income rather than on the whole income."

On tax calculated on participating in Dus Ka Dum, Aggarwal said that the department could not hold the money which Yuvraj won from the show as service and, therefore, it can not levy service tax on it.

He further said that the two firms were agents of Yuvraj for which he engaged in promotional activities. "Therefore, agents or companies will be paying service tax on it," he said.

In February, the department had asked these players details regarding total payment and a break-up of the money received for playing cricket matches and sponsorships.

It also demanded a copy of the agreements signed by players with their franchise owner, total payment received from franchise owner, service tax registration number, if obtained, details of service tax of paid, copies of service tax returns, if filed, and complete books of accounts and balance sheet.