Mr Arun Jaitley, you just destroyed a thriving industry - By Tegbir Brar
Posted on - 21 May 2017
Mr Arun Jaitley, you just destroyed a thriving industry!
By Tegbir Brar
I’m no expert economist and from what I understand, the new Goods and Services Tax is going to simplify our country’s direct taxation regime. What I do understand is the economics of the business of racing and breeding thoroughbred racehorses and the proposed GST of 28% set by the Government of India has pretty much set the seeds for the end of our sport which has rolled along in a haphazard way since 1777. To treat it simply as gambling isn’t just plain wrong it shows a complete lack of application on the part of the GST Council, the Finance Ministry, the Agriculture Ministry and the entire Indian Government. It clearly seems as if they think some horses turn up on the race track, they run and people just gamble on it, well Mr Jaitley it’s a lot more and I mean a hell of a lot more than that.
It’s pretty obvious the government hasn’t done its due diligence as to the effect such a high tax slab will have on the industry as a whole. Nowhere in the world are betting pools taxed as heavily as this and frankly speaking all this will do is to drive betting underground to illegal bookmakers and penalize the transparent totalizator system which is the norm in successful racing jurisdictions like, Japan, Hong Kong, France and USA. The three most heavily hit race clubs will be Bangalore, Hyderabad and Mysore as they are running very efficient tote setups and as a result paying their State Governments a handsome amount in turnover tax, the reason for this is that they were taxed within reason and they were able to pass this on to their customers who seeing a good return flocked to the tote instead of the bookmakers and as a result swelled the total pool. The beauty of this system is that every paisa bet is accounted for and the government collects its fair share of Tax without any evasion or hiding whatsoever, the entire amount bet goes into a computerized pool, whatever percentage has to be deducted is and the rest is distributed back to the public in winnings.
All other clubs will be hit as well since Indian racing is synergistic in nature and a drop in tote commissions would mean a drop in commission paid between clubs as well. Further to this it’s very obvious that the government hasn’t looked at the employment racing and breeding generates, when I say the industry provides about 50,000 jobs believe me that’s a low figure it’s probably a lot higher. Take the example of Dashmesh Stud Farm and our village, Sarainaga. My family are basically farmers if we were to plant the normal Wheat and Rice prevalent in the area, I’d employ no more than 20 people to work the entire farm, two tractor drivers and another 18 farm labourers.
Since we are involved in breeding horses we employ at the farm; 60 syces, 30 women who clean stables, 30 supervisory staff, such as office people, jamadars, farriers, etc. 6 tractor drivers, 20 farm labourers, 15 watchmen, 12 gardeners to look after the stud yard and estate, 2 full time electricians, 2 veterinarians and 4 compounders. Further to this we also hire daily wage workers on a regular basis, at any given time at least 20 of them at any given time involved in jobs like painting, putting away produce etc. Added to this we buy horseshoes which come from Bangalore and are manufactured by somebody. Veterinary medicines, vaccines, bandages, chemicals etc. which are also manufactured by somebody. My truck man Surinderpal makes at least 15 annual up and down runs to and from racecourses either delivering young-stock or picking up mares. We also buy bran from a mill where again people are involved in the manufacture of the same. We pick up rice straw and a separate team are contracted to bring in 600 trolleys annually. Other farms buy their fodder and oats too, we grow ours in house. All in all as you can see from my example the knock on effect of running a Stud Farm provides a huge amount of indirect employment as well. Consider the fact that this is one stud farm alone, there are other farms spread out all over India who certainly employ a lot more staff that we do. We give employment to the average Indian, the majority of whom the universal government education system has failed miserably. My employees are the ones that run the show and they have trained on the job to look after horses and believe me it’s a very valuable skill.
Now let’s talk about a race club, they employ people in the thousands all the way from Veterinarians, racing officials, jockeys, trainers, riding boys, farriers, tote operators, security personnel, gardeners, those people who replace divots after every race, drivers, doctors, nurses, jamadars, race book sellers and a lot of syces in many places one per horse, to put things in perspective Bangalore stables a thousand horses. Owners own horses and pay bills, one usually earns that money from stakes and it is paid as Basic Training Fee or in the case of trainers and jockeys commissions. All this money to run the show comes from the income that clubs get from their betting commission on the tote, BTC was taking 4% from the turnover to fund their racing and paying 8% on turnover as tax, when one factors in entertainment tax and service tax BTC was paying the Karnataka Government 11% in taxes. Now if that amount rises to the proposed 28% suddenly the tote pool shrinks and the punter gravitates towards the illegal bookie who pays 0% tax and pays nothing to the sport. Most of these syces and riding boys come from backward places like Bihar, Jharkhand, UP and the Marwar region of Rajasthan, they earn money and send it home to their families, so someone should tell Mr. Jaitley that the cascading effect of a 28% tax slab runs across a lot of places far far away from the, ”Race Clubs.”
If clubs run their racing efficiently and earn money from betting which is whether one likes it or not the fuel that keeps our engines running, the cascading effect is a more robust market as higher betting turnover means better stake money and better remuneration for owners which makes owning horses viable. All a 28% tax will do is drive legal betting underground and as such cause a loss to the exchequer as well as the clubs that run the sport, they’ll continue running it in a meagre way instead and as has been proven time and again this causes owners and trainers to be more dependent on gambling rather than shooting for excellence to make ends meet.
The unfortunate thing is that the GST Council has failed to see empirical evidence available in India itself before coming to this decision of taxing Race Clubs at 28% on their betting. RWITC was paying a 20% tax to the Maharashtra Government, this is a ridiculous tax rate on horse betting the result was that the club was paying the state government well under 20 Crores annually. I can safely say that RWITC’s turnover that is lost to illegal betting easily runs to over a thousand crores. On the flip side was BTC who by running a successful totalizator based operation with a sensible tax rate of 8% was paying the Karnataka Government something in the region of Rs. 200 Crores annually. Now with 28% taken by the government and the club taking a commission the overall pool shrinks and a shrinking tote means misery for all involved, the club, the government and all connected dependents.
I’m pretty sure that those who have decided to fiddle with what is a very fine balancing act when it comes to revenue have never been to a racecourse or visited a stud farm ever. Worldwide breeding of horses is encouraged by governments and even subsidized as it provides jobs and it’s an environmentally cleaner option than any kind of intensive farming. Breeding horses means no using of pesticides on pasture, paddocks are pretty much left to grow naturally. Further breeding horses is a very viable and well paying animal husbandry option and it’s agricultural in every way. Without experience as a farmer any breeder would struggle, breeding horses is simply put a value added agricultural system.
One hopes that we as an industry for once get some relief. To start with the GST has taken over what ought to stay on as a state subject. Our Racetrack and Off Track Betting project in Punjab which was a straight up project worth Rs.600 Crores of Foreign Direct Investment and was going to bring at least 10,000 permanent jobs and a lot of welcome revenue for our cash strapped state is now dead in the water. No one in their right mind will invest in a racing project where the tax rate is 28%, the total take out from pools; which means government tax plus the club’s commission in no proper racing jurisdiction exceeds 20%. The Punjab Government as part of the project was going to earn between 5% and 10% as their cut. Well that’s all gone because people who scarcely understand our industry sit in judgment over it. Shame on you Indian Government, I didn’t know that the panacea that GST was promoted as is supposed to suck the guts out of an industry that few understand. You’re not creating any new jobs at least don’t destroy the ones that exist!