Better than Betting

G.S. Vijay Kumar By G.S. Vijay Kumar, 18th Aug 2012 | Follow this author | RSS Feed | Short URL http://nut.bz/24l18km6/
Posted in Wikinut>Money>Tax

It is curious that in a revenue-starved country like India, while all sorts of services are unfailingly taxed, betting and gambling enjoy steadfast exemption. Perhaps the time has come to change the rule.

Before Mr Pranab Mukherjee demitted the finance minister’s office, he ensured that the people of India remained grateful for yet-untaxed sunlight and fresh air.

Why incentivise Gambling & Betting ?

It is curious that in a revenue-starved country like India, while all sorts of services are unfailingly taxed, betting and gambling enjoy steadfast exemption. Perhaps the time has come to change the rule.

Before Mr Pranab Mukherjee demitted the finance minister’s office, he ensured that the people of India remained grateful for yet-untaxed sunlight and fresh air. However, given the government’s impost obsession, it may not be long before we are required to pay service tax for the privilege of enjoying natural resources.

Service tax was first introduced in July 1994 and only three services, namely telephone, general insurance and stockbroking, were brought under its ambit at that time. Gradually, over the next two decades, nearly 120 services were brought in the tax net. During this period, revenue grew from a modest Rs 410 crore in 1994-95 to Rs 95,000 crore in the financial year 2010-11. And, it is expected to climb to Rs 120,000-plus crore in 2012-13.

In the Budget presented to Parliament on 16 March, 2012, Mr Mukherjee expanded the list of services to be taxed and brought within the tax ambit almost all forms of services with the exception of a negative list stipulating 17. We all use a number of services. Many Indians pay water tax depending on their use. Electricity comes for a price as do phone services, cooking gas, an evening at the cinema. There is even road tax that we must pay as we must pay property tax. Service tax is levied on all 365 days in a year on what one earns, what one spends, what one eats, what one wears and the list is endless.

The service tax rate, when introduced in 1994, was 5 per cent ad valorem. It was increased to 8 per cent in 2003 and to 10 per cent in the following year with an additional education cess of 2 per cent levied on the tax amount. The rate was further enhanced to 12 per cent plus 2 per cent education cess in 2006. In 2007, while retaining the tax rate of 12 per cent plus 2 per cent education cess, a new secondary and higher education cess of 1 per cent on the service tax was introduced taking the aggregate tax rate to 12.36 per cent.

In the Budget presented on 29 February 2009, the service tax rate was reduced to 10 per cent from 12 per cent but education cess as well as secondary and new education cess were retained, thus bringing down the total outgo to 10.30 per cent. In March 2012, Mr Pranab Mukherjee again increased the levy by another 2 per cent, taking the total tax outgo under the service tax head to 12.36 per cent.

As such, a scrutiny of tax-exempt services stipulated in the negative list is in order. And such a scrutiny reveals that betting, gambling and lottery are tax exempt. One wonders why betting and gambling deserve such an incentive. In normal circumstances, even illegally-accrued income is taxed. For example, income earned through smuggling or such other patently-illegal activities will attract income tax.

Though lottery is legal, betting and gambling are not and therefore do not warrant exemptions or incentives. It is true that people are unlikely to declare income earned from betting or gambling but all the same, such practices cannot be incentivised.
There may be a strong case for legalising betting in India. Even a Delhi court thinks that betting on cricket and other sports should be made legal. The court pointed out that since police had failed to curb illegal betting in the country, legalising betting would help the government keep track of transfer of funds in addition to generating revenue that could be used for public welfare schemes and infrastructure building. It is common knowledge that cricket betting has acquired alarming proportions and an estimated amount upwards of Rs 20,000 crore had been pumped in by illegal betting syndicates during the Indian Premier League last year. According to estimates, Delhi alone has nearly 3,000 bookies operating at any given point of time when cricket matches are played anywhere in the world. The extent of money that betting and gambling generates is diverted to clandestine activities, including drug trafficking and terrorism.
Perhaps the time has come to consider legalising betting so that not only additional revenue can be generated to fund infrastructure projects and also enough resources can be mobiled to check organised crime successfully.

Tags

Betting, Budget, Budget 2012, Finance Minister, Fresh Air, Gambling, Incentive, Indian Budget, Lottery, Pranab Mukherjee, Revenue, Service Tax, Sunlight, Tax, Tax Exemption, Taxation, Taxes Good And Bad

Meet the author

author avatar G.S. Vijay Kumar
I am a management graduate and have worked as a senior executive for 25 years in the corporate sector.I am a columnist and write on management, Economics and socio-economic topics.

Share this page

moderator johnnydod moderated this page.
If you have any complaints about this content, please let us know

Comments

author avatar GV Rama Rao
31st Aug 2012 (#)

Excellent.
I don't mind the taxes, but my blood boils when I hear about the scams.

Reply to this comment

Add a comment
Username
Can't login?
Password