The clarification published by the GST Council pertaining to betting on totalisator and bookmakers on Thursday has dealt a body blow on horse racing. While there were conflicting interpretations about the 28 percent to be paid to the government as GST, it has been clarified that ``Notwithstanding anything contained in the chapter (15 of GST Act), value of supply of betting and gambling shall be 100 percent of the face value of the bet or the amount paid into the totalisator.``

The turf clubs hitherto remitted to the government 28 percent of the commission earned on betting though to be on the safer side they had collected taxes as per the present clarification to provide for a possible future liability on an inclusive basis. Since the notification is proposed to be effective from January 25, the clubs have made some money at the expense of the punters by collecting higher deductions on the tote. Notwithstanding the fact that the clubs can get away without claim on past dues, the turf clubs and racing faces a bleak future because the effect of GST on betting and the number of race days that each club can conduct have been greatly compromised.

Chairman of RWITC Khushroo Dhunjibhoy met the GST Council Secretary on Delhi on Friday to highlight the serious problem that racing would be put to in the light of the clarification which gives no scope for clubs to interpret the GST in any other way. ``The meeting was exploratory. I cannot say it was outright fruitful. The GST Secretary was appreciative of our presentation and gave a patient hearing to our views. But since the decision will finally have to be a political one, it takes intense lobbying to get any relief.``

The GST on betting wherever the system prevails in the world is on the commission and not on the investment. Logically speaking, in no sphere of activity GST is levied on investment. It is as simple as that. There has been drastic fall on the betting on the club`s totalisator pools all over the country. The weighted value of the tax was 8 percent at which there was a phenomenal increase in betting on tote pools. The Bangalore Turf Club grossed about Rs 2000 crores turnover because of the low tax. The Hyderabad Race Club came second with about Rs 1300 crores. The Mysore Race Club had about Rs 300 crores. RWITC which was grossing Rs 300 crores when the tax was 10 percent has seen a drastic fall ever since the tax was doubled and it is now at a measly Rs 70 crores for 12 months at both Mumbai and Pune. With the increase to 28 percent, the collections on the Bangalore tote has fallen by 50 percent while it has been much more at Hyderabad. Only three turf clubs in the country, Bangalore, Mysore and Hyderabad were able to generate a huge volume of betting on legalised club operated pools due to low taxations but the hike has seriously altered the situation now. The downward swing will be maintained because so much of money is taken out of the system which is not going to come back for rotation on the tote. Unfortunately, these three clubs which depend on totes for their survival have been pathetic in their lobbying with the government. BTC is the worst being more busy with protecting membership rather than saving racing.

The turf clubs have been forced to go for a drastic cut in many race days and the stakes have also been a casualty. The decreased race days have also impacted the economics of the turf club in India which are inter-dependent on each club conducting its activity to the full. The situation will become very bleak if the clubs are not able to wriggle out a concession by effective lobbying which sadly one must say that has been lacking barring individual efforts like the one being made by the RWITC Chairman.

The previous person who was asked to liaison with the government had tweeted several months ago: ``TAI cannot take GST on betting lightly. It is clear the intention of the Council is 28% tax on face value. To pay otherwise is very risky for a sport already under distress.`` The club took the risk of paying on commission and succeeded for a brief period. The fact that the turf clubs tried to impress on the GST Council much before they had even formed opinion also hurt its cause. The GST Council was perhaps enlightened by those who were responsible to work out a favourable tax regime.

It is reported that even the Karnataka government which was sympathetic to the turf club`s cause also pressed for a clear direction from the GST Council to notify that the tax was on the turnover. It may be recalled that the club was in a standoff with the Chief Minister of the State about conceding 50 memberships to the government which had resulted in racing activities coming to a standstill for four months causing serious problem to the survival of the sport. The club lost about Rs 20 crores in the bargain just because the BTC members, the majority of whom have no stake in racing, did not want to lose their privileges by accommodating more members. If the club had paid heed, the government could have been helpful.

The impact of the economic ruination of race clubs will also be felt by the supporting agro-based industries. Besides, racing is a labour-intensive field.

The fact that the GST Council has clarified that the tax on betting would be 28 percent and made the effective date from which the clubs must pay the tax as per the clarification as January 25, the clubs have a strong case to approach for relief from the courts if their lobbying fails to extract a concession. The tax now shoots up phenomenally from what the clubs would have paid prior to the clarification which should be the reason for the dispute because of the draconian nature of the tax regime as it is against the principles of natural justice and fair play.