Pranab Da, Why are you incentivising gambling and betting ?

G.S. Vijay Kumar By G.S. Vijay Kumar, 18th Apr 2012 | Follow this author | RSS Feed | Short URL http://nut.bz/44ig6tuj/
Posted in Wikinut>Money>Tax

why is it that that the Honourable Finance Minister of India, Shri Pranab Mukherjee has incentivised betting and gambling . Under normal circumstances, even illegal incomes are taxed. If someone earns through smuggling or such other activities, he is bound to pay income tax on such earnings.

Pranab da, why are you incentivizing gambling and betting?

We are thankful to the Honourable Finance Minister for sparing us on the use of sunlight and fresh air, the latter being a rare commodity in the country of late, although one is not sure as to when these two will be brought within the ambit of service tax.

Service tax was first introduced in July 1994 and only three services, namely Telephone, General Insurance and Stock Broking, were brought under the tax net then. Gradually, over a period of time nearly 120 services have been brought under the tax net. During this period, the revenue has grown from a modest Rs 410 crores in 1994-95 to reach a staggering figure of Rs 95000 crores in the financial year 2010-11. This is further expected to reach Rs 120000 plus crores in 2012-13.

In the recent budget presented to the Parliament on March 16, 2012, the Honourable Finance Minister Shri Pranab Mukherjee has decided to further expand the list of services to be taxed and has brought within the tax ambit almost all forms of services with the exception of a negative list containing 17 services. We all need various kinds of services. We consume water and we pay water tax. We consume electricity and we pay tax for the use. We use phone services, cooking gas and so there is a tax on all of these. We drive on the road and we pay road tax. We live in a house and we pay property tax. We go to a cinema and we pay entertainment tax. We pay service tax if we go to a restaurant. Almost each and every activity we undertake, there is a tax. The tax is levied 24 x 7 on all the 365 days on what one earns, what one spends, what one eats, what one wears and the list is endless.

Looking at the expanse of the services and the resource crunch faced by the government, one wonders as to when sunlight and fresh air are going to be tapped by the Finance Minister. However, we are thankful to the Honourable Finance Minister for sparing us on the use of sunlight and fresh air although one is not sure as to when these two will be brought within the ambit of service tax.

The service tax rate, when introduced in 1994 was 5 % advalorem. This rate was increased to 8 % in 2003 and 10 % in the following year with an additional education cess of 2 % on the tax amount. The rate was further enhanced to 12% + 2 % education cess in the year 2006. In the year 2007, while retaining the tax rate of 12 % + 2% education cess, a new secondary and higher education cess of 1 %on the service tax was introduced taking the aggregate tax to 12.36%. In the budget presented on 29th February 2009, the service tax rate was reduced to 10 % from 12 % while retaining the education cess as well as the secondary and new education cess thus bringing down the total outgo to 10.30%. This year, Mr. Pranab Mukherjee has again increased the levy by another 2 % taking the total tax outgo to 12.36%.

Now, what is amusing is the list of services in the negative list which are tax exempt. If one takes a closer look at the negative list, one finds the mention of betting, gambling or lottery which is exempt from tax. One wonders why such an incentive has been provided for betting and gambling. Under normal circumstances, even illegal incomes are taxed. If someone earns through smuggling or such other activities, he is bound to pay income tax on such earnings.

Although lottery is legal, betting and gambling are not and therefore does not warrant any exemptions and incentives. It is true that such incomes are not likely to be declared by people who earn through betting and gambling but all the same, one cannot provide any incentives to such earnings.

There may be a strong case to legalize bettings in India. Even a Delhi court has advocated that bettings in cricket and other sports should be legalized. The court observed that the police have failed to curb illegal betting in the country and felt that legalizing betting would help the government keep track of the transfer of funds in addition to generating additional revenue that can be used for public welfare and infrastructure building. It is common knowledge that bettings in cricket has reached alarming proportions and an estimated amount upwards of Rs 20000 crores was pumped in by illegal betting syndicates during the Indian Premier League (IPL) last year. According to estimates, Delhi alone has nearly 3000 bookies operating at any given point of time when cricket matches are played anywhere in the world. The extent of money that it generates is diverted to clandestine activities including drug trafficking and terrorism. It is time we consider legalizing bettings so that additional revenues can be generated to fund various infrastructural projects and also check the lucrative business in organized crime.

G.S. Vijay Kumar is a senior corporate executive and a columnist.


Tags

2012 Union Budget, Betting, Evolution Of Service Tax In India, Finance Minister, Gambling, Lottery, Pranab Mukherjee, Service Tax

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.

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