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Racing will slip into troubled times
News: By: Sharan Kumar
January 5 , 2017
   
   

Racing which is already troubled by internecine quarrels among members, strife and falling footfalls and revenue through legal channels will be further crippled by the recent clarification by the government of India about the levy of GST on betting on horse racing. There was certain ambiguity whether the GST was to be paid on the bet value or on the commission earned by the club.

It has been unambiguously clarified that the GST must be paid on the value of the bet as before. No concession is forthcoming for a sport which has always attracted negative vibes because gambling is an anathema in our society and looked down upon as an evil. Though the Supreme Court had ruled that racing is a game of skill, the fact remains because there is also the betting aspect to the sport, the game was also a game of skilful deceit for the majority who earned their livelihood through the earnings from the sport legal or otherwise. The recent mudslinging incident in BTC which vent viral have also done enough damage to the sport as members of the club went about their act of sabotaging the sport with impunity.

 
   



The turf clubs had tried to benefit from the lack of clarity about the GST to be paid on betting through the club operated totalisator pools. They had been paying the amount on the net profit earned by the club. The club collected the GST on the bet value as a precautionary measure but did not pay it to the government. It kept the additional amount in a separate account hoping to benefit from the windfall income in case the clubs had the ruling going its favour. However, in a recent clarification issued by the ministry of finance dated January 4, the dreaded truth has come out. The GST will be charged on the actual amount charged (transaction value).

The Relevant part of entry 34 of the said CGST notification reads as under: ''Heading 9996 (Recreational, cultural and sporting services): Services by way of admission to entertainment events or access to amusement facilities including exhibition of cinematograph films, theme parks, water parks, joy rides, merry-go-rounds, go-carting, casinos, race course, ballet, any sporting event such as Indian Premier League and the like are taxed at 14 percent. Gambling likewise is 14 percent. As is evident from the notifications, entry to casinos and gambling are two different services and GST is leviable at 28 percent on both these services (14 percent CGST and 14 percent SGST) on the value determined as per Section 15 of the CGST Act. Thus, GST at 28 per cent would apply on entry to casinos as well as on betting/gambling services being provided by casinos on the transaction value of betting i.e. the total bet value, in addition to GST levy on any other services being provided by the casinos (such as services by way of supply of food/drinks etc at the casinos). Betting, in the pre-GST regime, was subjected to betting tax on full bet value.

GST would be leviable on the entire bet value i.e. the total of the face value of any or all bets paid into the totalisator or placed with licensed bookmakers as the case may be. Illustration: If the entire bet value is Rs 100, GST leviable will be Rs 28.

The survival of racing was dependent on the Turf Authorities of India lobbying for a reduction in the draconian GST. However, the turf authorities have failed in their endeavour and the clarification as issued on Thursday is sure to cripple the sport. The Bangalore Turf Club which lost Rs 25 crores in the recent stand-off with the government, has already wiped out its reserves and now will have to pay the GST which they collected and did not pay to the government. The members of the club are so insensitive as to claim victory for obtaining the license after a great deal of ordeal to those dependent on the sport by claiming that they got the license holding firm about broad-basing of membership including giving 50 memberships to the government.

Unless the government puts a cap on the GST and brings it down to 18 percent, there is very little hope for racing to prosper as before. If the government doesn’t destroy the sport through the draconian GST, the politics of the turf clubs will do the needful. Ironically, the Karnataka Government which appointed the monitoring committee to ensure that public interest was not sacrificed has gone for a flawed committee, appointing members of the club to monitor their own activities! The monitoring committee has lost its sanctity in the absence of totally neutral members in such an important body. The entire constitution is a sham and clearly shows that Govt was not really interested in setting right the rot in the club, as it claimed.

 
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