GST on Sponsorship Services: Rate, RCM & SAC Code 2026

GST on Sponsorship Services in India: Rate, SAC Code & RCM Rules (2026)

Sponsorship is one of the most effective tools for brand visibility but the moment money changes hands between a sponsor and an organiser, GST enters the picture. And this is where a lot of businesses get it wrong. GST on sponsorship services does not work like standard advertising tax. There are specific rules around who pays, when they pay, and whether they can claim it back.

Key Points To Know Before You Read Further

• The tax on most sponsorship deals is paid by the recipient, not the service provider at least in some scenarios
• A flat 18% GST applies to virtually all taxable sponsorship agreements in India
• Businesses paying under RCM can typically claim full Input Tax Credit
• Certain sports and charitable events carry a GST exemption by design

GST Applicability on Sponsorship Services

The GST Act does not formally define "sponsorship," but the rules are clear enough in practice. Tax applies whenever an entity provides sponsorship to another and by sponsorship, the law generally means giving a brand naming rights over an event, displaying logos, or granting exclusive visibility. That last part matters.

If a person gives money to an event without expecting any commercial return no logo, no mention, no booking priority that is a donation. Donations generally fall outside the GST net. But the moment brand association enters the equation, it becomes a taxable supply of service.

Three conditions together trigger GST applicability:

• The organiser must offer brand association or promotional benefit to the sponsor
• The sponsor must provide consideration money or otherwise
• The visibility offered must go beyond a simple charitable acknowledgement

GST Rate on Sponsorship Services

The GST rate for SAC code 998397 which covers sponsorship and brand promotion services is 18%. This breaks down into 9% CGST and 9% SGST for transactions within the same state, or a flat 18% IGST when the two parties are in different states.

After the September 2025 GST revision, services under SAC 998397 that do not fall under a specific exempt category continue under the standard 18% slab.

Service Category	SAC Code	GST Rate
Sponsorship & Brand Promotion	998397	18%

Whether the tax is collected by the organiser under Forward Charge or deposited by the sponsor under RCM, the rate stays the same 18%, no exceptions for the taxable category.

Reverse Charge Mechanism (RCM) on Sponsorship Services

RCM is the compliance point that trips up most businesses dealing with sponsorships. Under RCM, the sponsor the one receiving the service deposits the GST directly with the government rather than paying it to the organiser.

A significant shift happened effective January 16, 2025, through Notification No. 07/2025 Central Tax (Rate). Sponsorship services provided by a body corporate were moved from RCM to the Forward Charge Mechanism, meaning the corporate organiser now collects and deposits the tax themselves.

The expression "sponsorship" was not defined under GST law, but guidance can be drawn from the erstwhile Service Tax law which defined it as giving the sponsor naming rights, displaying the company's logo or trading name, or granting exclusive or priority booking rights. Financial support in the form of donations, with no obligation to provide anything in return, was excluded from this definition.

Here is how the current rules map out:

Scenario	Supplier Type	Recipient Type	GST Charge Type
Sponsorship by non-body corporate	Individual / Firm / NGO	Body corporate or partnership firm	RCM applies
Sponsorship by body corporate	Private / Limited Company	Body corporate or partnership firm	Forward Charge
Sponsorship to individual / non-corporate	Any supplier	Individual / HUF / unregistered	Forward Charge
Exempt sporting events	Any supplier	Any recipient	Exempt from GST

One thing worth noting: LLPs are not treated as body corporates under this classification. Sponsorship services provided by an LLP continue to fall under RCM the January 2025 change does not apply to them.

Input Tax Credit (ITC) on Sponsorship Services

The good news for sponsors paying GST under RCM that tax is not a dead cost. Businesses can typically claim it back as Input Tax Credit, since sponsorship qualifies as a "business promotion" expense under Section 16 of the CGST Act.

To claim ITC for GST paid under RCM on sponsorship services, the recipient must issue a self-invoice as required under Section 31(3)(f) of the CGST Act, 2017 particularly when the service is procured from an unregistered supplier.

Beyond the self-invoice, the standard ITC conditions apply:

• A valid tax invoice or RCM payment voucher must be on record
• The tax must have been deposited with the government in cash (for RCM)
• The service must not fall under Section 17(5) blocked credit categories
• All details must be correctly reflected in GSTR-3B and GSTR-1

One important nuance if the sponsorship supports an exempt event (like a qualifying sporting event), ITC reversal may be required to the extent the expenses relate to those exempt supplies. That is something to account for before claiming in bulk.

GST Exemptions on Sponsorship Services

Not every sponsorship deal carries a tax liability. The government has carved out specific exemptions to support sports development and social welfare, and these are worth knowing if your business sponsors events in those categories.

Exempt categories include:

• Events organised by a recognised National Sports Federation
• Events conducted by the Association of Indian Universities or the School Games Federation of India
• Sponsorship provided to the Indian Olympic Association specifically for the National Games
• Sponsorships given to trusts registered under Section 12AA of the Income-tax Act
• Sporting events where teams represent a district, state, or zone

The rationale is straightforward taxing grassroots sports events would deter corporate support. These exemptions keep that pipeline open.

How The 2025 Changes Affect Corporate Sponsors

The January 2025 amendment was not a minor procedural tweak. With the removal of RCM for sponsorship services provided by a body corporate, the responsibility of paying GST now falls under the forward charge mechanism simplifying compliance for corporate entities offering sponsorship services.

What this means practically: if you are a company sponsoring a professionally managed corporate event run by another registered company, you no longer need to calculate, self-invoice, and deposit the GST yourself. The organiser's GST-inclusive invoice covers it. You pay, receive the invoice, and claim ITC.

The compliance chain is cleaner. The audit trail is cleaner. And the room for error which was significant under blanket RCM is considerably smaller.

FAQs

Q1: Is GST applicable on all types of sponsorship in India?

A: Not all sponsorship is taxable. GST on sponsorship services applies when the sponsor receives commercial benefit naming rights, logo visibility, exclusive booking rights, or brand association. Pure donations where the donor gets nothing in return are generally outside the GST net. Specific sporting and charitable events also carry exemptions under the law.

Q2: Who pays GST on sponsorship services the organiser or the sponsor?

A: It depends on the supplier's legal status. Since January 16, 2025, if the organiser is a body corporate (private or public limited company), the Forward Charge applies meaning the organiser collects and deposits the GST. If the organiser is an individual, firm, or NGO and the recipient is a body corporate or partnership firm, RCM applies the sponsor pays the tax directly to the government.

Q3: Can a company claim ITC on GST paid for sponsoring an event?

A: Yes, in most cases. GST paid on sponsorship whether under RCM or Forward Charge qualifies for Input Tax Credit under Section 16 of the CGST Act, provided the sponsorship is used for business purposes. Proper documentation, including a valid invoice or RCM payment voucher, is mandatory. If the event is exempt from GST, ITC reversal may apply for that portion.

Q4: What is the SAC code for sponsorship services and brand promotion under GST?

A: SAC code 998397 covers sponsorship services and brand promotion services under GST. It falls under the heading "Other professional, technical and business services" and carries an 18% GST rate. This is the code to use on invoices, GST returns, and all compliance filings related to sponsorship and brand promotion work.

Q5: What are the penalties for not paying GST on sponsorship services under RCM?

A: Failing to deposit GST under RCM even unintentionally attracts interest at 18% per annum on the unpaid amount, calculated from the due date. Beyond interest, the business also loses the right to claim Input Tax Credit for that period, which can significantly inflate the effective tax cost. Accurate self-invoicing and timely GSTR-3B filing are the cleanest way to stay compliant.