The Bangalore Turf Club received a big jolt from the Service Tax Department as the Commissioner has passed an order to the club to pay the service amount of about Rs 6.70 crores immediately which pertained to veterinary services, testing of samples abroad and various other services provided by the club. Similar demands have been contested by other turf clubs in the country. The amount includes the original claim as well as penalty.

Recently the Bangalore Turf Club mandarins decided that betting on tote does not attract service tax as it came under the negative list and stopped paying the same. The club was collecting half per cent from the tote betting for this purpose but has decided to do away with the same and even has reportedly written to the Service Tax Department for the refund of the amount paid. Perhaps this triggered the Service Tax Department to re-open the old file, take up the old claim and pass an order referred to. The club can contest the claim but only after depositing 7.5 percent of the amount. One hopes the club takes proper legal advice from reputed and experienced service tax consultants and also takes the services of retired Chief Accounts Officers of the Club who are well versed in this matter before proceeding with their plan of action. It is said that P V Reddy, Chief Accounts Officer of Hyderabad Race Club, is reportedly an expert on this matter and his services could also be enlisted. The opinion is that the claim can be contested if the matter is proceeded with due diligence.

The Service Department has made this claim about six years back contending that various services offered by the club attracted the provisions of Service Tax. The matter had dragged on for several years but with the new dispensation perhaps not being aware of the problem on hand and not pursuing the matter with the seriousness, the Service Tax Commissioner has gone ahead and passed the order. The Commissioner has also slapped a fine of Rs 1 lakh each on former Chairmen of the club namely Harimohan Naidu, Harindra Shetty, D M Kumaraswamy and Dr Srinivas Gowda who held the post during the disputed period. The former Secretary of the club has also been fined Rs 1 lakh.

The turf club, after legal consultation obtained from Aravind P Dattar, a practicing advocate of Supreme Court and an expert on service tax matters, had been paying service tax on tote betting. Since the tote operations by the club is not deemed as gambling activity by the club, there is confusion on this score. The Bangalore Turf Club, RWITC and Hyderabad Race Club and Mysore have been paying service tax on tote operations. Incidentally, the fixed tote betting on RWITC did not attract the provisions of the betting tax as the club in this instance was conducting gambling activity directly. As far as betting on tote was concerned, the interpretation is that tote betting is between two unidentified persons in terms of an interpretation of the Supreme Court decision in K R Lakshmanan vs Government of Tamil Nadu dispute and that the club was only facilitating a service which attracted the provisions of service tax. The turf club, as a matter of abundant caution, was paying service tax despite there being no claim. This was because in the event of GST becoming a reality, the club will have a leeway in seeking the imposition of tax restricted only in respect of net commission and also to avoid any future liability.

Though the service tax on betting on totes has been a debatable matter, the BTC, had been paying the service tax because of the fear that the claim would be too high if the demand were to come at a later date and the club may not have the resources to meet the claim. However, the present committee, in its own wisdom, has chosen to play with trouble by not paying the service tax before seeking a written clarification from the department. The club, instead, could have created a fund for any future eventuality. The inexperience at the helm and the aggressive stand of the committee may come to hurt the sport in a way it may cripple its activities in future on this account.

The Managing Committee is showing lot of immaturity. The club can expect more troubles on many fronts in the very near future.