The Turf Authority of India (TAI), an organised association of six race clubs in India, has urged the Centre and States to rework norms related with applicability of Goods & Services (GST) on horse racing. TAI has suggested levying GST on only commission or service fee retained by a race club and exclude prize money of the winner. The association has also pushed for a lower rate of GST 18 percent as the Supreme Court has declared horse racing as ‘game of skill’ and not a ‘game of chance.’“Horse racing is neither gaming nor gambling as defined and envisaged under the two acts (Police Act and Gaming Act),” the apex court had said way back in 1996.
At present, GST is levied at the rate of 28 per cent on transactional value of betting on the total bet value. During horse racing, many people (better known as punters) place bet or ‘wagers.’ Race clubs act as the service provider for the wagering transaction. The wagers are placed through totalisator, which is essentially a computerised device that pools the wagers (after deduction of charges and statutory taxes) of various punters and also divides the total wager amount to be distributed to the winning punters. In order to provide the service of facilitating wagering transactions, the race clubs get some commission, which is deducted and retained by the club from the total bet value. The statutory tax that is to be levied is also deducted from the from the total bet value at this stage. Remaining amount is finally fed into the totalisator and becomes part of the wager pool for division and distribution among winning punters. According to V Harimohan Naidu, Chairman and Senior Steward with Bangalore Turf Club Ltd, this is a critical issue. GST is levied on the total value including the commission levied by race club and thus actual outgo for punters is much less.
“This promotes illegal betting which in turn results in lesser revenue for the government and of course race club,” Naidu said while adding that it also affect horse breeding sector and various allied activities. He said that revenue for Bangalore Turf Club during pre-GST regime was over ₹1,900 crore which came down to nearly ₹850 crore immediately after introduction of GST. Similarly, Zavaray Poonawala, President, Poonawala group, which operates stud firm near Pune, said heavy impact of revenue means loss for the entire breeding sector. “If this situation continues, then technically speaking, 10,000 horses are to be put to sleep. Also, approximately three lakhs man days will be lost,” he said. Beside, farm activities will also be affected.
According to GST rules, the value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100 per cent of the face value of the bet or the amount paid into the totalisator. Entry 6 of Schedule III of CGST Act defines “Actionable claims, other than lottery, betting and gambling” not as supply of services. This meant the Act does not levy any tax on the prize money of horse racing. The association has requested tax authority for a circular for clarification as “the Act takes precedence over rules, notification or circular there should not be any GST on actionable claim (prize money in horse racing) by treating horse racing as game of skill and not as betting or gambling.” Globally, there is tax only on commission.