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Can Betting & Gaming piggyback on GST Bill? - Let's bet on it!

TIOL - COB( WEB) - 482
JANUARY 07, 2016

By Shailendra Kumar, Editor

KUDOS to Justice R M Lodha and other Members of his Committee for making sweepingly sporty and racy recommendations to restore the bruised faith of cricket-buffs in the neutrality of the game and also the autonomy of the regulators like BCCI and IPL. As expected, the high-powered Committee has submitted its Report to the Apex Court, making landmark recommendations impacting virtually all the dimensions of the game and also the functionalities of the BCCI. Running into 12 Chapters - starting with 'Getting Off the mark' and finishing with 'End of the Innings' - the exhaustive Report seems to have declared 'run out' many political and corporate biggies habitually monopolising plum posts in both - the Government as well as the cricket regulating bodies. Secondly, it has also sounded the death knell for illegitimate dominance of the States of Maharashtra and Gujarat having multiple cricket associations with voting rights in the BCCI as against a blank by as many as nine States. In other words, upholding the spirit of federalism in the domain of sports, the Committee has called for 'One State, One Association & One Vote' regime. This would mean that if the Apex Court accepts the recommendation, all the States would have a voting right and cricket players of all the States would stand equal and fair chance to play for Team India. The recommendations made with respect to the reforms of the structure and constitution of the BCCI, Governance and Management of the game, registration of Players' Association and Agents, Transparency and conflict of interest have evidently come to be seen as an 'unplayable googly' and many of political and cricketing giants are likely to be declared 'leg before wicket'!!

Let me now move away from the sporty 22-yard turf to one of the most catchy recommendations of the Lodha Committee - legalise betting in cricket with certain safeguards. Such a recommendation is indeed a major bonus for the overall national security paradigm of India and also the Exchequer. If other recommendations are going to reform the regulators and the game of cricket, this one specific recommendation on wagering is going to be a major overdue reform of the legal governance system in India. Before I broach other aspects of this issue I would like TIOL Netizens to read my column uploaded in 2013 - "Legalising Betting & Gaming: Let it be a part of National Security Paradigm". Secondly, I would like to look into the matrix of safeguards advocated by the Committee which are:

++ Regulatory watchdogs would be necessary to ensure that the betting houses as well as those transacting there are strictly:-

a) monitored, failing which their registrations would be susceptible to cancellation; b) The Players, Administrators and others closely associated with the sport would be required to furnish the details of their incomes and assets for the sake of transparency; c) Licenses would have to be issued to those placing the bets as well, with age and identification details recorded; and d) Strict penal sanctions would have to be imposed on those transgressing the license and other requirements.

I fully agree with the recommendations but I wish the Committee could have looked deeper into the constitutional difficulties associated with the act of legalising betting and gaming. Since three erudite former judges of the Apex Court were applying their minds together to the various dimensions of the ticklish issues, it would really have been a major windfall gain if they would have provided a constitutional leeway for setting up a National Regulator for Betting, Gambling and Gaming. The problem arises from the fact that betting and gambling is a part of Entry 34 of the State List. Some legal experts believe that the Centre can legislate on betting in sports vide Entry 42 of the Union List i.e. inter-state trade and commerce. Though such an idea may work in the short-run but betting is no longer confined to only the national geographical boundaries. Internet has emerged as the biggest platform for such activities and a good number of offshore companies have been making fortunes out of this trade. Lodha Committee itself quotes a figure of USD 400 billion as the size of worldwide legal sports betting. Some studies indicate that the global online market may grow at a CAGR of over 10% between 2014 to 2018.

It is also believed that the present size of the legalised betting market in India is about one lakh crore. Makar Sankranti is round the corner (January 14) and cockfights are going to be million dollar betting business in the States of Telangana and Andhra Pradesh. If betting in cricket is legalised along with online gaming, the market size may grow to over Rs four lakh crore. One can well imagine how much Central taxes like Income Tax and Service Tax and local taxes like Sin Tax can be collected from such a large market.

So, what is the solution? The actual remedy lies in amending the Constitution of India and shifting betting and gambling from the State List to the Concurrent List. Then a Central Legislation can be passed to set up a National Regulator which can be autonomous enough to issue licences to betting and gambling houses and even individuals licensed to place bets. Such a regulator can declare a sports in advance for the betting purpose and also declare an event illegal for betting such as election results and hanging.

Given the fact that the GST Bill is pending, the Union Government should grab this opportunity offered by the Lodha Committee to further amend the pending Bill which proposes to subsume betting and gambling and may propose a few more clauses for setting up a comprehensive Regulator which can regulate and licence the supply of betting and gambling services - offline as well as online. It could cover all aspects of sports including online gaming. It should also focus on regulating the participation of Indians in gaming offered by offshore companies and also payments made through e-wallets. Presently, a good number of Indians are opting for such options bypassing the FEMA provisions.

It is high time the Union Government latches on to this opportunity, not only to collect some taxes but also to regulate the socio-economic behaviour of the citizens who feel compelled to do something illegal for the lack of a law. Most of the Western economies and even small islanded economies like Isle of Man have put laws in place for such an irresistible profit-making activity and they continue to attract a good number of visitors online from the emerging economies like India where internet connectivity has been quite impressive. Unlike e-commerce, India should not miss the bus of legalising and regulating this rapidly growing business which has been eating into the neutrality and sanctity of sports in the country. Let's hope the Union Government legislatively wakes up before it is too late!

Also See : TIOL TUBE Videos on GST

simply inTAXicating - Future of GST Bill

News Capsule 5 - Interactive session with Arun Jaitley on ‘GST in India'

Select Committee Report on GST

Episode 4 on GST - Select Committee Report

Tax manthan -Episode 1

Episode 3 on GST

Episode 2 on GST

Episode 1 on GST