Horse racing franchisees and stud farm business owners have got reasons to cheer, after the Union budget for FY21 announced 0% customs duty on the import of pure-bred horses.

A day after the budget announcements, a customs duty notification issued on Sunday said the existing 30% duty on the import of pure-bred breeding horses, will be removed for 2020-21. The high tax was often regarded by business owners as “punitive". India allows import of horses, which are used to breed racing horses.

According to one person privy to the discussions leading to the duty cut, although betting is seen as gambling, racing does not involve any social cost and is a sport that involves extensive training and use of skill, which also generates employment.

“The decision will improve the availability of such horses in India," he said, requesting anonymity.

Horse racing is a heavily-taxed activity, which contributes both direct and indirect taxes to the exchequer. Tickets for admission are taxed at 28%, while the prize money is taxed at a flat 30% under a special provision of the Income Tax Act, irrespective of the person’s income tax slab. Prize money from a race can go up to 40 crore.

The sport is popular in Mumbai and Bengaluru. Imported horses are not allowed to participate in racing, but are used to breed.

The move will also enable stud farms in India to compete in the world market. Ravi Reddy, president and senior veterinarian, Nanoli Stud and Agricultural Farm, Pune, said the industry currently imports breeding horses from the UK and Ireland, and the high tax rates were impacting the business.

“The duty exemption will help in bringing level playing field and help Indian farms to make a mark in export markets," said Reddy, an expert in equine reproduction. The move could help horses bred in India to be priced competitively in markets such as Malaysia and Vietnam.

Basic customs duty, which is outside the goods and services tax, is not available as credit for the user and its removal is seen as a major tax relief on imports.

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