Delta Corp gets another GST notice of Rs 6,384 crore, total tax shortfall now at Rs 23,206 crore

Delta Corp gets another GST notice of Rs 6,384 crore, total tax shortfall now at Rs 23,206 crore

The casino chain Delta Corp recently disclosed to the stock exchanges that its subsidiary Deltatech Gaming has received notification regarding the payment of a shortfall tax amounting to Rs 6,384 crore. Deltatech Gaming, previously known as Gaussian Networks, is primarily engaged in operating gaming applications such as Adda52 and Addagames.

According to the company’s filing with the stock exchanges, the Goods and Services Tax (GST) notice urges Deltatech Gaming Limited to settle the alleged tax deficit, inclusive of any accrued interest and penalties. Failure to comply with the payment requirements may result in the issuance of a show-cause notice to the company, pursuant to Section 74(1) of the Central Goods and Services Tax (CGST) Act, 2017.

This development suggests a potential tax-related challenge for Delta Corp’s subsidiary, necessitating careful evaluation and strategic measures to address the situation effectively. As the company navigates through the regulatory procedures and addresses the concerns raised in the notice, it will be essential for them to work closely with tax authorities and seek appropriate legal counsel to ensure compliance with the applicable tax regulations and mitigate any potential financial and reputational implications.

The recent tax notice received by Delta Corp has significantly increased the company’s total tax shortfall liability to Rs 23,206 crore. This substantial liability is notable, especially when compared to Delta Corp’s market capitalization, which is currently valued at Rs 3,749 crore. The substantial disparity between the tax liability and the market capitalization is a cause for concern and may have significant implications for the company’s financial position and market standing.

Prior to the recent tax notice, Delta Corp had received a direct tax notice amounting to Rs 11,140 crore on September 22. Additionally, three of its subsidiaries, namely Casino Deltin Denzong, Highstreet Cruises, and Delta Pleasure Cruises, were issued a combined notice of Rs 5,682 crore. These multiple tax notices, coupled with the recent development, underscore the magnitude of the tax-related challenges faced by the company and its subsidiaries.

According to the company, the amounts claimed in all the notices are linked to the gross bet value of games played. As Delta Corp navigates through these tax-related challenges, it will be crucial for the company to undertake comprehensive assessments, engage with tax authorities, and explore viable solutions to effectively manage and address the tax liabilities while safeguarding its financial stability and market position.

The gaming industry, including casinos and online gaming companies, has been contending with the implications of the GST council’s decision to levy a 28 percent tax on the full face value of chips purchased for gameplay. This tax policy translates to players having access to only Rs 72 for every Rs 100 worth of chips bought, thereby impacting their gaming experience and overall engagement.

Moreover, the shift in tax calculation, from charging GST solely on net house winnings to the gross bet value, has raised significant concerns within the industry. Delta Corp’s statement reflects the industry-wide issue, as various representations have already been made to the government at the industry level, highlighting the implications of the GST policy and advocating for potential revisions to ensure a more balanced and conducive taxation framework.

The demand for the application of GST on the gross rake amount, rather than the gross bet value, aims to address the industry’s concerns and ensure a more equitable taxation approach that accounts for the nuances of the gaming business. As the gaming industry continues to engage with regulatory authorities and policy makers to address these challenges, it is essential to foster a constructive dialogue and explore effective solutions that balance the government’s revenue objectives with the sustainability and growth of the gaming sector.

In response to the challenges stemming from the tax-related issues and regulatory uncertainties faced by its subsidiary Deltatech Gaming, Delta Corp had decided to put the initial public offering (IPO) plan for Deltatech Gaming on hold. This strategic decision reflects the company’s cautious approach in light of the current market conditions and the challenges associated with the gaming sector’s regulatory landscape.

Despite these challenges, Delta Corp managed to achieve a modest 1.6 percent year-on-year increase in consolidated net profit, amounting to Rs 69.4 crore for the quarter ending in September. Additionally, the company reported a slight increase in its revenue, reaching Rs 270.6 crore in the second quarter of the fiscal year 2023-24, as compared to Rs 270 crore in the corresponding period of the previous fiscal year.

The company’s ability to maintain stable financial performance in the face of regulatory and market challenges underscores its resilience and effective management strategies. As Delta Corp continues to navigate through the evolving regulatory landscape and addresses the tax-related issues, it will be crucial for the company to remain vigilant, explore strategic alternatives, and prioritize initiatives that foster sustainable growth and stability in the gaming sector.