Organisers of the Indian Grand Prix set to take place at the end of next month have intervened in an effort to resolve the tax dispute that has become the latest issue threatening to overshadow the inaugural race around the under-construction Buddh International Circuit around 80km away from New Delhi.
Last week, India's government revealed that it believes it is due a portion of the income the teams receive through the year as tax – and that it intends to hold team principals personally accountable for the payment of import duty on all of the racing cars and equipment.
The situation has been described as 'a significant worry and concern among the teams' by Formula One Teams' Association (FOTA) chairman Martin Whitmarsh – and serious enough as to risk a boycott of the race since 'you don't go somewhere if you're going to be penalised' [see separate story – click here
A total bill of £80million in customs duty on all imports has been mooted – to be reimbursed following the grand prix less a two per cent tax levy, anticipated to be in the region of £1 million – and with the Indian government insisting that it will not waive the fee, independent race organisers Jaypee Sports International (JPSI) have offered to pay it on teams' behalf.
'JPSI has full support from the government, the sports ministry and the customs department for the F1 event scheduled for October this year,' reads a statement from JPSI chief executive, Sameer Gaur. 'We have an in-principle approval from the customs department for creating a customs bonded area for F1 equipment that will be temporarily imported to India. If required, as per the law of the land, JPSI will pay customs duties and taxes for the temporary import of equipment.'
A customs bonded area is standard practice in F1, with cargo being taken directly from the runway tarmac to the circuit and likewise upon its departure, thereby avoiding any objects being imported – but the Indian customs department is adamant that such a request has been rejected. Instead, customs officials will escort the entire F1 consignment from the airport to the circuit, where it will be opened in their presence.
JPSI is confident the Indian government will ultimately concede and relax its tax rules, and its offer to foot the bill will only apply should the government stand firm and refuse to grant an exemption. At present, however, the customs department is demonstrating little inclination to slacken its demands, with the crux of the matter being that it classifies F1 more as entertainment rather than a sport – and not 'an event of national importance'.
“When equipment is imported for sports events of national importance, the sports ministry issues a certificate on the basis of which the customs department issues [an] exemption notification subject to [the equipment] getting exported back,” Sumit Dutt Majumder, chairman of the Central Board of Excise and Customs (CBEC), told PTI
“For the Commonwealth Games and the (Cricket) World Cup, those certificates were issued, so we gave exemption. In this case, the sports ministry has not given any certificate, so there is no question of granting any exemption. As it is, they are entitled to get duty drawback [of] up to 98 per cent on the equipment imported – so effectively, they will have to pay only around two per cent. This is not an event of national importance, so no such exemption is required.”
It is understood that JPSI agreed during the initial negotiations about bringing F1 to India that it would be 'at no cost to the government'. The tax row is just the latest in a series of embarrassing setbacks that have left many fearing a repeat of Korea or the Commonwealth Games débâcle