Date: January 16, 2025
Notification: Notification No. 07/2025-Central Tax (Rate)
Issued By: Ministry of Finance, Department of Revenue
Effective Date: Immediate
In alignment with the recommendations of the 55th GST Council Meeting held on December 21, 2024, the CBIC has issued Notification No. 07/2025-Central Tax (Rate) to amend the applicability of the Reverse Charge Mechanism (RCM) for sponsorship services. This amendment alters the tax liability for body corporates by shifting their sponsorship services under the Forward Charge Mechanism (FCM).
Amendment to Serial Number 4 of Notification No. 13/2017
(A) against serial number 4, in column (3), i.e. after the words “Any person”, the words “other than a body corporate” shall be inserted.
| 4 | Services provided by way of sponsorship to anybody corporate or partnership firm. | Any person other than a body corporate | Anybody corporate or partnership firm located in the taxable territory. |
Explanation of the Changes:
- Original Provision:
Earlier, any sponsorship services provided to body corporates or partnership firms were taxed under the RCM. - Revised Provision:
Sponsorship services supplied by body corporates are now subject to tax under the Forward Charge Mechanism (FCM).- The supplier, if a body corporate, will now be responsible for collecting and depositing GST.
- Sponsorship services provided by non-body corporates will continue under RCM.
Implications of the Amendment
For Body Corporates (Suppliers):
- New Tax Responsibility:
Body corporates supplying sponsorship services must now register under GST (if not already registered) and comply with FCM requirements. - Invoice Management:
Body corporates will need to issue GST-compliant invoices and remit tax directly to the government.
For Partnership Firms and Body Corporates (Recipients):
- Reduced Compliance Burden:
Recipients no longer need to calculate and pay GST under RCM for sponsorship services received from body corporates.
For Non-Body Corporate Suppliers:
- Status Quo Maintained:
Sponsorship services provided by non-body corporates will continue to be taxed under RCM, where the recipient bears the tax liability.
Regularization Under IGST and UTGST Acts
Similar amendments have been issued under the Integrated Goods and Services Tax Act, 2017 (IGST Act) and the Union Territory Goods and Services Tax Act, 2017 (UTGST Act). These changes ensure uniformity across different GST frameworks and eliminate potential ambiguities in tax liability for sponsorship services.
There is no definite meaning assigned to “Body Corporate” to amplify who all are covered under the said definition