If the exits of horse racing’s biggest owners in the last three years dealt it a body blow, then the combined effect of the goods and services tax (GST) put a chokehold on it and threatens to cut off air supply. The turnover from betting on the totalizator (a device showing the number and amount of bets staked on a race, to facilitate the division of the total among those backing the winner) is down across most centres nation-wide, falling by 44 per cent, from a total of Rs 3,954 crore to Rs 2,218 crore in the last year.

That’s also affecting the production of the number of racing horses across centres, which have dwindled from 4,078 to 3,569 over the last four years. Here’s how totalizator, or tote betting, works. If a 100 punters put Rs 100 each on a bet, then Rs 10,000 goes into a kitty, which is operated by the turf clubs. Earlier the government would levy an 8 per cent tax on the kitty, in addition to which the clubs would add their 3-4 per cent in management fees, which meant a total of around 13 per cent in overall costs. Simply put, the punter earlier was betting Rs 100, which would see Rs 13 deducted before the odds kicked in.

Now, the GST of 28 per cent, and the club commissions of 4 per cent, add up to a total cost of 32 per cent, reducing the bet to Rs 68, making betting less lucrative than before for all parties. This has not only made it hard for the clubs to realise gains, but reduced the overall betting odds for racing, thereby discouraging betting, says Hari Mohan Naidu, chairman of the Bangalore Turf Club (BTC). “The turnover for BTC alone has dropped from Rs 1,900 crore to about Rs 800 crore and the government is losing on revenue they wouldn’t have if not for the higher tax,” Naidu says.

Khushroo Dhunjibhoy, chairman of the Royal Western India Turf Club (RWITC), says every sport runs on a business model, but the current one is unsustainable. People may continue to bet but increasingly with bookmakers and illegal channels and “that money will not come back to the system,” says Zeyn Mirza, managing director, United Racing & Bloodstock Breeders, and former steward at the BTC. “Owners will stop investing and consequently breeders will reduce production, which will lead to extensive displacement of jobs.” Horse racing and breeding is a labour-intensive sector that employs between 50,000 and 60,000 people, according to industry-wide estimates.

He goes on to add that even online gaming is being taxed only at 18 per cent as compared to 28 per cent for horse racing, which the Supreme Court has qualified as a game of skill. GST-puts-horse-racing-in-chokehold-as-betting-turnover-plummets Taxes aren’t the only problem.

In the last three years, racing has seen its top owners leave, creating a vacuum. McLeod Russel Vice-Chairman Deepak Khaitan of Kolkata died in 2015 as did Chettinad Group Chairman M A M Ramaswamy of Chennai, who owned as many as 1,000 horses and was considered racing’s ‘Godfather’. Then, the key sponsor of title races, Vijay Mallya, who had as many as 100 horses racing, has left the country. To make things worse, last month, after Christmas last year, police raided bookmakers’ stalls in Mumbai to check for unlicensed operators on the premise that accurate gambling figures were not being recorded and that the GST was being evaded.

Over a dozen bookies were arrested and jailed. What the government is missing entirely is the big picture, according to Mirza. “Reducing the tax will drive people towards legal tote betting.” In any case, he asks why other “pure gambling” activities such as state-managed lotteries only pay a GST of a flat 12 per cent. There’s a puritanical streak across governments that pushes racing into a sin category even while common sense suggests that the lower the tax, the higher the revenue, says Farrokh Wadia, president of the National Horse Breeding Society of India, and owner of the Yeravada Stud Farm.

Why is horse racing a sin? “It is so because betting equals gambling in the mind of the policymaker,” Wadia says, adding that behind the racing there is the entire industry of horse breeding, which creates 3.25 million mandays of primary employment a year, based on industries studies by Indicus Analytics. Mirza adds that “cricket is not seen as a sin even though betting on it runs into huge monies”. Is there a solution stewards see? “Taxing the commissions the clubs earn, as against the entire turnover, is one,” says Mirza. When the BTC abolished bookmakers prior to the implementation of the GST when the tax was at 8 per cent the turnover on the tote went up 35 per cent in the first three days of racing. “If that is addressed by the government then the RWITC will move to eliminate betting through bookies entirely,” says Dhunjiboy.