Counsel for gaming listco Delta Corp has alleged before an appeals court that India’s government offered to withdraw overwhelming GST back payment notices if the gaming industry accepts its goods and services tax (GST) regime.
Chinks in the armour of India’s gaming tax strategy are emerging in the Bombay High Court, where Delta Corp counsel Harish Salve alleged the central government’s revenue secretary, Sanjay Malhotra, made the offer to gaming companies to make their back tax notices disappear.
Salve, a former solicitor general of India, told the Goa branch of the court on Monday (October 23) that Delta and possibly other companies were assured the central government “will make retrospective GST notices go away” if they cooperated, the G2G news portal quoted him as saying.
If true, the allegation points to official awareness of the unfeasibility of de facto retroactive GST claims by the Directorate General of GST Intelligence against online and land-based companies totalling some 2.5trn rupees ($30bn) to date.
It would also point to a tacit admission by the government that the tax is being enforced retroactively, despite the GST Council and the finance ministry insisting that their recent review and codification of gaming taxes merely clarified the law.
Delta Corp is facing a $2.8bn bill for unpaid GST on gaming operations for its casinos in the states of Goa and Sikkim, for its cruise liner casinos, and for online skill game operations including rummy and poker.
Salve told the high court that the GST rate of 28 percent on initial deposits for online activity and gaming volume for land-based gaming created “fictitious value for turnover”, as opposed to a tax on gross gaming revenue (GGR) that was paid until the new policy came into force on October 1 this year.
DGGI counsel and state GST agency officials told the court that they would not “take any coercive action” against Delta Corp or its gaming subsidiaries while the case was being heard, G2G reported.
This apparently reverses the DGGI’s national strategy of demanding repayments from gaming companies even as the wider, industry-threatening GST dispute reaches the Supreme Court of India.
Following the Karnataka High Court’s rejection of DGGI back claims against skill gaming company Gameskraft Technologies, the DGGI appealed to the Supreme Court, which stayed the Karnataka ruling. This opened the door for a slew of DGGI delinquent tax notices across the gaming industry.
Meanwhile, in a separate legal action by Delta Corp, the Sikkim High Court has ordered the DGGI and other government agencies to suspend GST back claims until further notice, a decision that may have triggered the suspension of the DGGI claim against Delta in Goa.
Also appearing for Delta in the case, Salve told the court on Friday (October 20) that a “nonsensical” 28 percent tax on the full face value of bets placed companies in an untenable position.
The Bombay and Sikkim court decisions open the door for other gaming companies to appeal their GST back notices pending court determinations, assuming that the DGGI does not suspend its tax collection campaign elsewhere.