Delta Corp, Nazara shares plunge up to 28% on GST rate hike on online gaming

Shares of online gaming companies were hammered on Wednesday, a day after the Goods & Services Tax (GST) Council proposed to levy 28% uniform tax on online gaming, casinos and horse racing. The gaming industry is currently paying 18% GST on its revenues i.e. platform fee intake (known as ‘gross gaming revenue’ or GGR) for providing users a platform to play. Reacting to the news, shares of Delta Corp, a gaming and hospitality firm that owns and operates casinos and hotels under several brands, crashed as much as 28%, while Nazara Technologies, a Rekha Jhunjhunwala portfolio stock, tumbled over 14% intraday.

Delta Corp shares opened 10% lower at ₹222.15 against the previous closing price of ₹246.80 on the BSE. Extending opening losses, the gaming stock declined as much as 28% to hit an intraday low of ₹178.20. The share price of Delta Corp just 3.5% away from its 52-week low of ₹172.3 touched on July 12, 2022. Recently, the smallcap stock hit a 52-week high of ₹259.95 on June 28, 2023.

At the time of reporting, the stock was down 22.6% at ₹191.10, while the market capitalisation stood at ₹5,117 crore. The counter witnessed strong volume with 25.6 lakh shares changing hands over the counter compared to two-week average volume of 1.46 lakh stocks.

Meanwhile, Nazara Technologies shares opened 14.4% lower at ₹605 against Tuesday’s closing level of ₹706.50 on the BSE. The online gaming stock, however, recovered from early losses and was trading 3.8% lower at ₹680 at the time of reporting. On the volume front, 3.3 lakh shares changed hands over the counter compared to two-week average volume of 0.22 lakh stocks. The market capitalisation stood at ₹4,490 crore.

At the current price level, the counter is down 14% from its 52-week high of ₹789 touched on September 12, 2022, while it is up 41% from its 52-week low of ₹481.95 hit on March 20, 2023.

The Goods and Services Tax (GST) Council, at its 50th meeting on July 11, decided to levy tax on online gaming, horse racing and casino services at a uniform rate of 28%. Tax will be applicable on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmakers in the case of horse racing and on the full value of the bets placed in the case of online gaming, says the GST Council.

This comes after a Group of Ministers (GoM) was constituted to look into the issues related to taxation on casinos, horse racing and online gaming. The GoM submitted its first report in June, 2022 and it was placed before the GST Council in its 47th GST Council meeting wherein, it was decided that the GoM may relook into all the issues once again. The GoM submitted its report and it was placed before the 50th GST Council meeting.

The GST Council has recommended suitable amendments to be made to the law to include online gaming and horse racing in Schedule III as taxable actionable claims.

Pratik Jain, partner, Price Waterhouse & Co LLP says the decision to levy 28% on gross value in the case of online gaming and casinos is perhaps not what the industry was hoping for.

India's gaming industry, which is growing at a CAGR of 28-30%, is saddled with the decision taken in the 50th GST Council Meeting with regard to its taxability, says Kishore Kumar, lead, Indirect Tax, Taxmann.

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