Horse Racing Neither Goods nor Services, So Why GST?

With the Goods and Services Tax (GST) axe looming large on horse racing fraternity, the Turf Authorities of India officials are hoping to get a favourable verdict when the GST Council meets on May 18 and 19 in Srinagar.

They intend to emphasis on the larger implications of the GST which will have a critical impact on racing in India. They want the GST Council to either keep racing out of GST or collect 12% tax on the income earned and not the expected 28 %.

There has been talk of the tax being 18 to 28 per cent. Most race clubs in the country pay 8% to the respective state government as betting tax, 1.5% as entertainment tax and 12% service tax on commission earned. This could vary from club to club depending on the total turnover.

The GST idea is to have one tax rate for the entire country and will be applicable uniformly to all states. But only cities in six states – Bengaluru and Mysuru (Karnataka) Mumbai and Pune (Maharashtra), Chennai and Ooty (Tamil Nadu) Kolkata (Bengal), Hyderabad (Telangana) and Delhi conduct licensed horse racing activity. So, in a way, GST in racing will be applicable only to these six states while it will not matter to the rest. 

Then again, it can be argued that horse racing is neither ‘goods’ nor ‘services’. So how come GST applies to horse racing? 

If the same principles are applicable, and horse racing is a ‘game of skill’ as defined by the honourable Supreme Court, it must also apply to other sports which charge gate money from the public.

Also Read: Legalised Sports Betting The Way Forward

Income Tax? Yes, because there is income from horse racing. Commission? Yes, as the authorities must generate funds to conduct racing and maintain and improve all infrastructure, Taxes to the government? Yes, as the government provides licenses and must get something in return. 

As such, if GST goes up from 11 per cent to a maximum of 28 per cent, race clubs and other sporting bodies may be hit hard and might have to be put on life support.

The Bangalore Turf Club, for example, had  Rs 2,000 crore turnover from the money received as bets at the totalisator pools operated by the club. BTC has not given licenses to bookies to operate ever since demonetization took place on Nov 8, 2016.  In 2014-15, the BTC had a profit of Rs 1.12 crore. It was Rs 5.34 crore in 2015-16. But upto May 2017, the BTC is said to have incurred losses to the extent of Rs 6 crore because of service tax which is being paid under protest and the matter is under consideration. 

The BTC, as all other race clubs, is not covered by the provisions of the Service Tax Act and they are not a service provider. 

In 2016, the TAI officials turf club met GST Council chairman and Union Finance Minister Arun Jaitley and have given him a 14-point letter pointing out the problems. 

Now the matter has come to a boil. With racing about to get underway in a fresh season, all eyes will be on the meeting at Srinagar.

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