GST of 28% on betting a real threat to the survival of the sport - By Vivek Jain
Posted on - 25 May 2017
GST OF 28% ON BETTING A REAL THREAT TO THE SURVIVAL OF THE SPORT
By Vivek Jain
When the Turf Authorities of India (TAI) gave me the responsibility, during the Invitation Cup meeting, to head the discussions on GST relief with the Government of India, I knew then itself that it was going to be an onerous task, but accepted it, appreciating the confidence shown by TAI and also knowing it was perhaps the single biggest challenge facing our sport in decades.
When the tax on betting on the totalisator was announced at the Srinagar GST Council meeting on May 19, at the maximum slab of 28%, it came as a shock not only to all who had worked tirelessly over months to make ourselves heard but also to the industry across the board. It appears that the image of racing as encouraging gambling and as a “social evil” on par with liquor and smoking, and the lack of support by non racing states (an overwhelming majority) tilted the scales for the highest tax to be notified. I must specifically applaud the effort of Zeyn Mirza who has been in touch with me virtually every day, reached out to the Karnataka top brass, being the most crucial racing state and facilitated a few crucial meetings in Delhi. Harish Ramchandani on behalf of RCTC was always available to join the delegation and support the cause, even at short notice, as this was after all, a TAI matter.
Our efforts began on December 16th, when we were lucky to get an audience with the H’ble Finance Minister of India, Mr Arun Jaitley. Thereafter we followed this up with countless representations and meetings with the tax commissioners of the racing states who were to be our spokesmen at the meeting. In addition important bureaucrats both in the GST Council and the Tax Research Unit (TRU) were met in person. The general feeling in the run up to the Srinagar meeting was that we had a reasonable chance for a tax at either 12% or 18%, as we were able to establish that the all India weighted average tax was just 7.6%. Our plea that the tax, even at a much higher percentage be applied on earning (i.e. the commission) as that was the general interpretation of the model GST Rules, did not find favor. We impressed that race clubs are mere facilitators of the betting transaction, and the tax has to be applied only on the earning of our service as facilitators. This is the clear interpretation provided in Rule 6 (1 and 2) of the GST Rules.
It is even more surprising that a tax of 18% has been fixed for on line gaming and the GST on lottery will be decided on June 3. We are reliably informed that if the Council fixes a lower rate for GST on lottery, we stand a fighting chance to have the rate lowered, as quite clearly lotteries are pure gambling, whereas betting on racing is on a sport of skill. Sadly racing is seen as a “rich man’s game” (unlike lottery) and this perception also possibly weighed in the mind of the decision makers, as can be seen as the highest tax being slapped on five star hotels.
We have represented that the 28% levy, represents a 400% increase on the current average tax whereas the stated objective of the Council has been to fix tax for each industry at near about the current levels. The Council has completely lost the impact of the most important fall out of the 28%- a torrential flow to illegal channels and loss of revenue to the State. The H’ble Prime Minister has been strong on bringing transparency and rooting out cash in all transactions, and this draconian levy will have exactly the opposite effect.
That racing is a pan India employer of conservatively over 50,000 directly and indirectly and the potential loss of jobs in the agrarian/ farming sector if racing activity stalls should raise alarm bells to the men in charge. Employment is generated mainly from the non racing states and laying off the largely unskilled rural worker is a definite possibility. The cascading effect of the detrimental impact on club’s finances is real and cannot be dismissed. BTC generated nearly Rs 2,000 crore on the tote in year 16/17 and paid over Rs 150 crore as betting tax. Conversely RWITC turned in a paltry 76 crore, paying the Government of Maharashtra barely 16 crore. The statistics cannot be more stark than that. We do not even have to dwell on off shore success stories of Hong Kong and Japan, for example, where in the former a betting turnover of over US $13 billion is generated on the back of a friendly tax regime.
We are hoping that all is not lost. Requests to meet the Finance Minister and the Revenue Secretary are pending. A strong PR effort to drive home the merit of the industry’s view is being attempted in the print/electronic/ social media. All this will take time and be a herculean effort and we need all India backing from TAI to support what needs to be done. The spin off benefit of a unified national tote, which was the dream, will now be largely insignificant.
The owners, breeders, syces and industry stalwarts have to come out of their cocoon of comfort and walk the talk and make noises in the right platforms, before it is too late to redress an already tough sport to administer. As of now the glimmer of hope is seemingly distant. But, miracles are known to happen, even on the race track!