Delta Corp in GST Tussle: Challenges Hefty Demand, Faces Profit Dip

In a significant development, online gaming and casino operator Delta Corp has contested a substantial Goods and Services Tax (GST) demand exceeding Rs 23,200 crore imposed by the authorities. The company asserts that the demand is arbitrary and contradicts legal provisions, prompting it to refrain from making any provisions towards the disputed amount.

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Financial Performance and GST Notices

Delta Corp reported a 59% year-over-year decline in its consolidated net profit for the quarter ending in December 2023, recording a profit of Rs 34.48 crore. The company's income from operations also witnessed an 18% decrease compared to the previous year, standing at Rs 181.54 crore.

Amidst these financial results, Delta Corp disclosed that its holding company and two subsidiaries received show cause notices from the Directorate General of GST Intelligence (DGGI) in Hyderabad. The notices alleged a short payment of GST amounting to Rs 16,822.9 crore for the period between July 1, 2017, and March 31, 2022. Subsequently, another subsidiary of the company received a separate GST show cause notice from DGGI, Kolkata, for Rs 6,384.32 crore covering the period from July 1, 2017, to November 30, 2022.

Industry-Wide Issue and Legal Challenges

Delta Corp highlighted that the tax authorities' demand based on gross bet value/gross face value instead of gross gaming revenue/gross rake amount has been a contentious issue within the industry. The company, along with other industry participants, has made multiple representations to the government seeking clarification on this matter.

In response to the show cause notices, Delta Corp and its subsidiaries have filed writ petitions and obtained stay orders from their respective High Courts. The company maintains that the notices and tax demands are arbitrary and contrary to legal provisions. It intends to pursue all available legal remedies to challenge these demands and the related proceedings.

No Impairment Provision for Now

Given the strong legal grounds to defend against the show cause notices, Delta Corp's group management believes that making provisions for impairment of goodwill and other assets related to the three subsidiaries is unnecessary at this stage. This decision is reflected in the company's consolidated financial results.

Delta Corp's challenge to the substantial GST demand underscores the complexities and disputes surrounding tax regulations in the gaming industry. As the company navigates legal proceedings, the outcome of these challenges will have significant implications for Delta Corp and the broader gaming sector in India.