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Taxmen, be sporting for F1 race, if not for Jaypee Sports International (JSPL)
September, 17th 2011

The government's tax collection arm is correct to reject a request from Formula One (F1) race organisers, Jaypee Sports International (JSPL), to waive Customs duty on imported equipment. However, it is in the wrong when it denies the F1 race either a bonded warehouse facility for the cars and equipment it would import for the temporary period of the race or the possibility of subsequent duty drawback on re-export of these imports.

Sporting events have become huge money spinners . Exempting them from the normal rules of taxation is tantamount to treating them as charity. This would be detrimental to the emergence of sport as a legitimate industry that caters to the population's growing appetite for entertainment and recreation.

If a tax-exempt charitable outfit like a football club can be bought or sold only with ad-hoc decisions by the tax authorities, based on recommendations of the ministry of sports, the tax treatment of the capital gains or losses that would arise would hurt the promotion of clubs, growth of football and its development as a thriving industry.

The organisers of F1 apparently sought an exemption even on beverages and special petrol, besides vehicles and engines. Pray, why? Most countries hosting sporting events create a Customs-bonded area to house equipment imported duty-free . The presumption is that the equipment will be re-exported after the event.

The Central Board for Excise and Customs (CBEC) extended such a facility for the Commonwealth Games and the cricket World Cup, based on certification by the sports ministry. Creating such a bonded warehouse area for the Indian Grand Prix is in order. Alternatively, the organisers can pay duty and be given a duty drawback once the goods are re-exported .

However, the CBEC has said that it cannot extend such a facility for the FI race as the event is not of national importance. Such a pick-and-choose approach is arbitrary. It is not arbitrary decisions by some minister or civil servant as to importance that should decide growth of a particular sport but the efforts of its stakeholders , among whom event organisers are prime.

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