The crippling burden of tax has eaten into the reserves of turf clubs, leaving them with few options to shore up their fortunes and raising the prospect of job losses and pay-cuts to semi-skilled migrant workers and equine professionals and closure of agriculture-based stud farms. A sport that employs thousands, horse racing has always shared a strong association with agriculture, providing it with a profitable market for animal feed and fodder. With the GST slab of 28 percent taking away nearly one-third of its earnings, the industry and its allied sectors, particularly farming, have been pushed to the brink. “It is not merely the glamour of racing thoroughbreds that you see at turf clubs. Horse racing is a job sector like any other,” senior Bangalore Turf Club steward V Harimohan Naidu told TOI.
“There are about 5,000 horses stabled at seven race centres in the country and around 20,000 livestock at 57 breeding centres. It means direct employment of 75,000 skilled and semi-skilled workers. Indirectly, another lakh of them are involved, particularly in the farm and medical sectors. All of them have been affected leading to a fall in demand, unemployment and job cuts,” Naidu added. The industry procures Rs 200 crore worth of agriculture, which is used as bedding for horses and one can visualise its spread in the rural areas. “The first big hit came three years ago when horse racing figured in the highest GST slab. Among those affected were the breeders. Statistics show that stud farms declined from 75 in 2012 to 57 to 2019. We also understand that many others are on the verge of closure. Statistics also show that foal production, the basis of breeding, has come down from 1,231 in 2017 to 1,133 in 2019, stallions from 78 to 74 and mares from 2,348 to 2,186. GST on the sale of horses has further contributed to the crisis,” Naidu said.
The reason is market-related. Demand for thoroughbreds has plummeted because owners the tested as well as the new are wary of investing as there aren’t any sizeable gains. Stake money, winners’ prize pool and incentives have all shrunk because the GST is applied on the entire totalisator revenue and not on the turf club’s commission. In any case, 28 percent has come as a savage cut as tax rates hovered around 7.6 percent prior to the GST regime. The biggest losers are the racing enthusiasts as a large quantum of their bet amount goes as taxes and commission, leaving them either in the red or with marginal profits compared to the pre-GST days. “The Turf Authorities of India has pointed out to the central government and the GST Council a number of times that the tote money, which is the total amount invested by the racing enthusiasts, cannot be taxed because it goes back to them. It is like money in an escrow account. Ideally, they should tax turf clubs on their earnings from the bet amount. This system is prevalent in many parts of the world, including the United Kingdom and the Far East. The GST law also states that only the transaction value the price paid for the supply of goods and services should be taxed. So why can’t there be some uniformity in taxation?” Naidu asked.
“We have also highlighted in our representation the negative fallout of high taxation. Primary among them is the unwelcome increase in illegal betting as racing enthusiasts will be attracted towards better returns. Racing enthusiasts are central to the turf club’s fortunes and their exodus will lead to a further fall in the earnings,” Naidu said. “The past three years have seen a steady decline in the volumes of formal betting, eventually leading to a dip in tax revenues to the government. Tote betting actually brings more and more bettors to the tax stream. We need a dynamic system of taxation which recognises the advantages of retaining a wider pool of racing enthusiasts. Eventually, their profit is our gain, their loss will be a big blow to us as well.”