Delta Corp shares crash 20% after ₹16,822 cr tax notice

Shares of casino operator Delta Corp Ltd dropped as much as 20% on Monday after the company received notices worth ₹16,822 crore from the Directorate General of GST Intelligence for payment of shortfall tax.

The first notice advises Delta Corp to pay an alleged tax liability of ₹11,139 crore along with interest and penalty for the period from July 2017 to March 2022, failing which a show cause notice will be issued to the company under Section 74(1) of the CGST Act, 2017 and Goa SGST Act, 2017.

The casino operator has also received notices amounting to ₹5,682 crore against three of its subsidiaries — Casino Deltin Denzong, Highstreet Cruises and Delta Pleasure Cruise Company. Highstreet Cruises and Entertainment has received the biggest tax demand of ₹3,289 crore.

The amount claimed in the notice is based on the gross bet value of all games played at the casinos during the relevant period.

Reacting to the development, shares of the company hit their lowest since January 2021. The stock was trading at its 52-week low of ₹140.20 on the BSE, dragging down the company's market capitalisation to ₹3,854 crore. On a year-to-date basis, the counter has fallen 33%. In comparison, shares of Rekha Jhunjhunwala-backed Nazara Technologies have surged 38% this year.

"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 company says in a regulatory filing.

"The company has been legally advised that the DG Notice and the tax demand is arbitrary and contrary to law, and the company will pursue all legal remedies available to it to challenge such tax demand and related proceedings," it says.

On July 12, the casino and online gaming stock slumped 27% in a day after the GST Council increased the Goods and Service Tax (GST) rates on casinos from 18% to 28%. Delta Corp owns casinos as well as poker and rummy websites.

At its 50th meeting on July 11, the GST Council decided to levy tax on online gaming, horse racing and casino services at a uniform rate of 28%. The 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.

28% GST on online gaming will be effective from October 1 as by that time all the states are expected to amend the state laws subsequent to the amendments to the Central GST Act enabling the higher tax bracket. "The Council recommended that the valuation of supply of online gaming and actionable claims in casinos may be done based on the amount paid or payable or payable to or deposited with the supplier by or on behalf of the players excluding the amount entered into the games bets out of the winning of previous games and bets and not on total value of each bets placed," finance minister Nirmala Sitharaman had said, adding that only the value at the entry will be considered for tax and not the gains accrued in each bet or games.