25-Oct-2023
2 mins read
Delta Corp, a prominent casino operator, witnessed a remarkable surge in its share price, soaring over 8% following a significant development. The Bombay High Court, Goa Bench, has imposed restrictions on tax authorities, preventing them from making any final decisions regarding the staggering Rs 16,194 crore GST notice issued to Delta Corp.
High Court Restricts Tax Authorities from Taking Definitive Action
Delta Corp disclosed this favourable development in a stock exchange filing on October 24. The company announced that the Goa Bench of the Bombay High Court had examined the writ petitions submitted by both Delta Corp and its subsidiaries in response to the show cause notices issued by tax authorities. The court issued an order that restricts the authorities from making definitive decisions without prior court approval. Additionally, the court has set specific dates for arguments, hearings, and the final adjudication of these writ petitions.
Massive GST Notices and Enormous Tax Claims
On September 25, Delta Corp received a tax notice alleging a shortfall of Rs 11,140 crore, while its subsidiaries were issued notices totalling Rs 5,682 crore. These alleged shortfalls in tax payments are related to the period from July 2017 to March 2022. Furthermore, on October 14, Delta Corp received fresh notices alleging a GST payment shortfall of Rs 6,384 crore.
Delta Corp’s subsidiary Deltatech Gaming also received notices from the Sikkim High Court on October 20, directing maintenance of the status quo until the next hearing.
According to the company, the amounts claimed in all the notices are based on the gross bet value of games played.
Impact of Tax Liabilities on Delta Corp’s Q2 FY24 Financial Performance
Delta Corp’s revenue saw a marginal rise, reaching Rs 270.6 crore in Q2 FY24 as compared with Rs 270 crore in Q2 FY23. The company has reported a 1.6% increase in consolidated net profit, reaching Rs 69.4 crore for the September’23 quarter. Despite the positive financial performance, the stock has declined by over 42% in the last year and 36% year-to-date in 2023. Notably, it saw a significant drop of over 21% in September when the Directorate General of GST Intelligence, Hyderabad, sent a notice of GST shortfall to the firm.
The total tax shortfall liability for Delta Corp now exceeds Rs 16,194 crore, a significant amount compared to its market capitalization of Rs 3,749 crore.
Challenges Faced by the Gaming Industry
Several online companies in the gaming industry have received show-cause notices totalling Rs 55,000 crore during the past few weeks, alleging evasion of GST dues. Some of these demands date back to 2017. This has been referred to by many as retrospective taxation, given that the notices pertain to the period before the implementation date of October 1, 2023, which introduced a new tax treatment for gaming platforms. The central government has clarified that the show-cause notices follow a legal clarification rather than a change, and the demand for dues is not retrospective in nature.
Impact of GST Council’s Tax Rate Change
The gaming industry has been grappling with the GST Council’s decision to impose a 28% tax on the full face value of chips purchased for playing, as opposed to the previous practice of charging GST only on net house winnings. This tax rate change significantly affects businesses like Delta Corp, which operates in casinos, horse racing, and online gaming.