Delta Corp gets GST demand notices of Rs 16,800 cr; company says would seek legal help
As per a regulatory filing released around midnight, one notice for Rs 11,140 crore has been raised against Delta Corp. The other notice for Rs 5,682 crore has been raised against three of its subsidiaries — Casino Deltin Denzong, Highstreet Cruises and Delta Pleasure Cruises.
Delta Corp said that the GST notice is based on gross bet value and not gross gaming value. It said it would pursue legal remedies to challenge this order. It has also pointed out that such tax demands are not a company-specific problem, but an industry-wide phenomenon.
“Demand of GST on gross bet value, rather than gross gaming revenue, has been an industry issue and various representations have already been made to the Government at an industry level in relation to this issue,” the filing said.
“The Company and its subsidiaries have been legally advised that all the above notices and the tax demands are arbitrary and contrary to law, and the Company and its subsidiaries will pursue all legal remedies available to them to challenge such tax demands and related proceedings,” the company said.
On Friday, Delta Corp Ltd said it received an intimation from the Directorate General of GST Intelligence, Hyderabad to pay an alleged tax liability of Rs 11,139 crore for alleged underpayment of the Goods and Service Tax (GST) for the period between July 2017 and March 2022. Failure to pay the amount will result in a show cause notice being issued to the firm.
The amount demanded includes interest and penalty, the company informed the stock exchange during the day, adding that it “will pursue all legal remedies available” to challenge such tax demand, which it is told is “arbitrary and contrary to law.”
“The amount claimed in the DG Notice is inter alia based on the gross bet value of all games played at the casinos during the relevant period. The demand of GST on gross bet value, rather than gross gaming revenue, has been an industry issue and various representations have already been made to the Government at an industry level in relation to this issue,” said the firm.
On Friday, the shares of the firm closed at Rs 175.25.
The tax notice has come as a setback for the casino operator. In July, the GST Council said it had decided to impose a 28 per cent tax on online gaming, casinos and horse racing.
The government has clarified that the tax on online gaming will apply only at the entry level, and not at the stage of every bet. Relevant amendment to GST laws were approved by Parliament in the last leg of the monsoon session.
The tax is likely to be effective from October 1, 2023, and the Council will meet again to review the taxation after six months from the date of implementation.
Delta Corp shares have lost about 29 per cent in market value since the government proposed the new 28 per cent GST in July.
This case is the second highest tax demand on an e-gaming company by the GST department so far. Last year, Bengaluru-based online gaming firm Gameskraft was asked to cough up Rs 21,000 crore. The matter is now before the Supreme Court, which on September 11 stayed the Karnataka High Court’s May 2023 judgment that quashed the tax notice.
Earlier, Revenue secretary Sanjay Malhotra said the GST receipts from the burgeoning online gaming industry were barely 2 per cent of its estimated turnover of Rs 85,000 crore in FY23. He said the clarification, approved by the GST Council, that online gaming attracts 28 per cent GST, would apply to the cases which are ongoing in various courts. “The 28 per cent tax applies already to online gaming. If there was any doubt, we have now clarified that,” Malhotra had said, after the August 2 council meeting.
