The tentative tax of 18% on horse racing, as proposed by the Goods and Services Tax (GST) council recently, could destroy the king of sports in the country. Though various racing clubs across the country currently pay varied rates of betting tax to their state governments, a common tax of 18% is bound to have a cascading effect on betting collections and inter-venue royalties.
The biggest setback will be felt by the Mysore Race Club (MRC), which pays just 4.5% tax at present. A jump of 13.5% is likely to sound its death knell as it has no other source of income to run its operations, which include expenses on stakes money and administrative costs.
The next big loser will be the Bangalore Turf Club (BTC) which currently pays 8%. A 10% increase will see lower dividends on Tote betting to punters who are likely to shy away from betting, resulting in a significant downfall in BTC's collections from around Rs 2,000 crore at present.
The betting volume at other clubs like Royal Calcutta Turf Club (currently 5% on win and 10% on other pools) and Hyderabad Race Club (15%) will also be hit.
It has to be noted, that apart from the betting tax, winning punters have to pay TDS on earnings beyond Rs 10,000.
The 18% may not sound too big for the Royal Western India Turf Club, which has a 20% tax burden now (with bookmakers it is 30%), the Madras Race Club (25%) and the Delhi Race Club (20%), but inter-venue royalty (the sum that clubs pay each other for accepting betting on that particular club) could take a significant hit.
Vivek Jain, the chairman of RWITC which oversees racing in Mumbai and Pune, admitted that despite the fact that the club already pays 20% to the Maharashtra government, the uniform rate of 18% will affect racing badly. "If 18% is bad for others, it is bad for the industry overall as we take each other's betting," Jain told TOI on Thursday .
Jain is also the head of a delegation of Indian racing's umbrella body , the Turf Authorities of India (TAI), which will meet the GST Council to pursue it to bring down the proposed rate of tax."We will meet the secretaries of the GST Council in Delhi this month before the rates finalisation meeting in Srinagar in mid-May . We will stress on the objective to bring down the incidence of illegal betting and cashless systems which only lower rates of tax can achieve," Jain said.
Jain also revealed that the TAI delegation is in the process of drafting a new representation incorporating details of GST calculations by other countries. "We are also analysing tax rates and tax collection by different states as part of our submission," he added.