India's GST Agency Slugs Delta Corp $2bn, Targets More Online Companies

September 26, 2023
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India’s sole land-based gambling listco Delta Corp has said it will fight the central government’s goods and services tax (GST) authority in court after receiving a demand for $2bn in unpaid GST on casino betting volume.
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India’s sole land-based gambling listco Delta Corp has said it will fight the central government’s goods and services tax (GST) authority in court after receiving a demand for $2bn in unpaid GST on casino betting volume.

Delta Corp said on Friday (September 22) that the Directorate General of GST Intelligence (DGGI) demanded 111trn rupees ($1.34bn) from the parent company and 57trn rupees from three subsidiaries, in addition to interest and unspecified penalties.

The company’s filing to India’s National Stock Exchange said each of the demands referred to an unpaid 28 percent GST on betting volume, or “gross bet value”, at affected casinos between July 2017 and March 2022.

“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 said in the filings.

“The company has been legally advised that the [DGGI] 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.”

The three subsidiaries targeted by the DGGI are Delta Corp’s casino in Sikkim state and two cruise liner companies.

Shares in Delta Corp plummeted, falling 23 percent since Friday to a 33-month low of 134.7 rupees on midday Tuesday (September 26).

The DGGI’s claim on Delta Corp follows a stay by the Supreme Court on a Karnataka High Court decision that blocked the tax organ from collecting $2.6bn in unpaid GST from online skill gaming company Gameskraft Technologies.

The stay came as the central government secured an appeal hearing with India’s top court to throw out the Karnataka ruling.

The DGGI’s catastrophic claims against Delta Corp and Gameskraft turn on the federal GST Council’s initial decision to “confirm” the rate of 28 percent for all real-money gaming and to apply it to betting volume rather than gross gaming revenue.

Online companies were given relief of sorts when the GST Council changed the calculation from betting volume to initial deposits.

But land-based casinos have enjoyed no such relief, with the central government’s finance minister and revenue secretary dismissing industry complaints of the tax being unworkable.

In any case, given the DGGI’s ruthlessness on GST coverage, India’s land-based casinos and youthful online gaming industry will now rely on a Supreme Court GST ruling for the survival of many if not most companies.

Meanwhile, the DGGI has indicated it is only warming up in its campaign to collect GST payments from the online sector.

The Business Today daily on Tuesday quoted unnamed government sources as saying that the DGGI will probe more than 100 companies “registered domestically with online gaming federations” for GST evasion on real-money gaming, in addition to some 35 to 40 companies now under investigation.

The central government in April gazetted new rules that allow online gaming federations to serve as self-regulators for the industry upon application, as part of a wider process of legalisation.

That move will have encouraged grey area operators to join the regulated space, but the DGGI’s use of gaming federation membership lists will now likely enhance any industry sense of betrayal.

Adding to the sector’s intense pressure, the Business Today report added that state government GST authorities are also beginning to probe the sector.

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