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For clarity on media rights taxability, BCCI goes to the Supreme Court

In order to avoid paying service tax, the Board of Control for Cricket in India is asking the Supreme Court to clarify whether the sale or grant of its media rights fits under the category of taxable "franchise services."

The legal dispute arose from an order issued by the Bombay High Court last year, which instructed the BCCI to petition the Supreme Court for a final decision. The inquiry concerns the service tax imposed on contracts the BCCI signed in 2008 and 2009 with MSM Satellite (Singapore) Pte Ltd. and World Sport Group (India) for the domestic broadcast of Indian Premier League games.

The authorities have demanded ₹250 crore in service tax, along with fines, which the BCCI is challenging. They contend that in terms of tax legislation, media rights grants do not qualify as "franchise services." According to the Economic Times, senior attorney Arvind Datar argued on behalf of the BCCI before the Supreme Court, stressing that broadcasters are not granted representational rights nor are they involved in any operations that are directly related to the cricket board.

The bench led by Chief Justice DY Chandrachud has now requested comments on the BCCI's petitions from the Finance Ministry and the Commissioner of Service Tax, Mumbai. The outcome of this lawsuit will establish whether the media rights agreements made by the BCCI qualify as "franchise services" and, if so, how much tax they will have to pay.

The verdict in this case could have a big impact on the BCCI's finances and establish a standard for situations like this one affecting other sports organizations and their media rights contracts.