Shares of Delta Corp Ltd tanked over 20 per cent in trade on Monday, 25 September, after the company received tax notices amounting to Rs 16,822 crore from the Directorate General of GST Intelligence on 22 September. This demand is for the period between July 2017 and March 2022.
According to a regulatory filing, one notice for Rs 11,140 crore and another notice for Rs 5,682 crore have been raised against three of its subsidiaries: Casino Deltin Denzong, Highstreet Cruises, and Delta Pleasure Cruises. If they fail to pay the amount, the company will be served with a show-cause notice.
In an exchange filing, the casino operator claimed that this GST demand is based on gross bet value and not gross gaming value. The company plans to pursue legal remedies to challenge this order.
At 10:30 am, the stock was trading 19 per cent down at Rs 142.30 on the National Stock Exchange (NSE) compared to the previous close of 175.25 per share. The stock fell below its previous low of Rs 173.75 touched on March 29, 2023 to hit 52-week low of Rs 140.35. Delta Corp trades under the futures & options (F&O) segment, which doesn’t have any circuit limits.
“Delta Corp, a leading company in the offshore casino business, is the only listed entity in this segment. The Rs 16,882 crore tax notice is a big blow to the company in the medium term,” said Kranthi Bathini, Director of Equity Strategy at WealthMills Securities.
“The notice comes at a time when Delta Corp has inherent capacity constraints for a long period given high entry barriers and strict regulations on gambling. Also, its Daman casino proposal has been pending for several years,” he added.
"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 added.
The company has received a notice for payment of shortfall tax under Section 74(5) of the CGST Act, 2017 and the Goa SGST Act, 2017 from the Directorate General of GST Intelligence, Hyderabad.
Delta Corp also said that it has been legally advised that the DG Notice and the tax demand are arbitrary and contrary to the law. The company will pursue all legal remedies available to it to challenge such tax demands and related proceedings.
Vaishali Parekh, Vice President of Technical Research, Prabhudas Lilladher Pvt. Ltd said, “the stock has tanked heavily below the important support zone of 165 levels and has hit 52-week low of 140 level indicating a weak bias turning the trend negative. The next important support visible is near 138 levels where it can consolidate and expect for some revival. The RSI also has plunged to the highly oversold zone and would need some pullback to regain the lost strength.”
As of now, one need to wait and watch for the bias to improve and only a decisive move above the 158-162 zone shall improve the trend to establish some conviction and anticipate for further upward move, Parekh added.
In September 2022, the Directorate General of GST Intelligence launched proceedings against Gameskraft Technologies Pvt for alleged tax evasion of Rs 21,000 crore by misclassification of supply activity. Gameskraft filed a legal challenge against the notice and won an order to revoke the notice in Karnataka High Court. However, the Supreme Court stayed the order.
The GST receipts from the burgeoning online gaming industry were only 2 per cent of its estimated turnover of Rs 84,000 crore in FY23, said revenue secretary Sanjay Malhotra earlier. The clarification, approved by the GST Council, that online gaming attracts 28 per cent GST would apply to the cases that 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 said after the 2 August council meeting.