Delta Corp Faces Additional Tax Notice: Total Tax Liability Surges to ₹23,206 Crore with ₹6,384 Crore Notice

Delta Corp

Delta Corp’s Mounting Tax Woes: A Deep Dive into the ₹6,384 Crore Tax Notice and the Broader Taxation Issues

Delta Corp, a prominent player in the Indian gaming and casino industry, is currently facing significant tax challenges. In a recent development, the company received another tax notice, this time for a staggering ₹6,384 crore.

This article delves into the details of this latest tax notice, the broader implications for Delta Corp, and the ongoing taxation issues in the gaming industry.

The New Tax Notice: ₹6,384 Crore and Counting

Delta Corp informed the stock markets of a new tax notice on Saturday, October 14, 2023, revealing that its subsidiary, Deltatech Gaming (formerly known as Gaussian Networks), had been slapped with a tax demand of ₹6,384 crore.

This notice primarily revolves around alleged outstanding taxes, interest, and penalties under the Goods and Services Tax (GST) framework.

Implications of the New Tax Notice

The implications of this latest tax notice are substantial for Delta Corp:

1. Financial Burden: Delta Corp is now grappling with a total tax liability of ₹23,206 crore, comprising the sum of multiple tax notices received in recent months. This enormous financial burden raises concerns about the company’s financial stability and ability to meet its tax obligations.
2. Market Value Discrepancy: In stark contrast to its burgeoning tax liability, Delta Corp’s total market value is a mere ₹3,749 crore. This significant discrepancy between tax liability and market value raises questions about the company’s ability to sustain operations.

A Recap of Previous Tax Notices

To understand the gravity of Delta Corp’s current situation, it’s crucial to recap the previous tax notices:

1. September 22 Tax Notice: Delta Corp received a hefty tax notice of ₹11,140 crore in September 2023. This was the first blow in a series of tax challenges.
2. Subsidiary Tax Demands: In addition to the primary notice, three subsidiary companies of Delta Corp – Casino Deltin Denzong, Highstreet Cruises, and Delta Pleasure Cruises – were slapped with a combined tax demand of ₹5,682 crore. These demands were related to taxes on gaming activities.

Calculations Based on Gross Wagering Amounts

All the tax notices received by Delta Corp have one common feature – they are calculated based on the gross value of the total wagers in the games.

This approach has been a point of contention between the gaming industry and tax authorities.

Gaming Industry’s Perspective

The gaming industry has long argued that GST should be levied on the value wagered rather than the total gross value.

This stance has been conveyed to the government through industry representatives. The rationale behind this argument is that taxing the entire gross value disproportionately affects the industry’s economics and players.

GST Council’s Decision and Its Implications

The GST Council’s decision to impose a 28 percent GST rate on the value of chips purchased for playing in casinos and online gaming companies was a significant change in policy.

This meant that for every ₹100 worth of chips purchased, players could only use ₹72 for betting, as GST was applied to the chip purchase itself, not just the winning amounts.

This decision marked a substantial shift from the prior taxation approach, where GST was solely imposed on the winnings.

While the GST Council aimed to boost tax revenue, this change was met with apprehension from the gaming industry and led to the ongoing disputes and tax challenges faced by Delta Corp.

Taxation Challenges in the Gaming Industry

The taxation issues affecting Delta Corp are emblematic of the broader challenges faced by the gaming industry in India:

1. Taxation Basis: The fundamental issue revolves around the taxation basis. The industry contends that taxing the value wagered is a fairer and more rational approach, as it aligns with the economic realities of gaming.
2. Impact on Players: Taxing the entire gross value has a direct impact on players, as it reduces the value of chips they can use for betting. This, in turn, affects the gaming experience and the industry’s competitiveness.
3. Financial Viability: The tax notices and the existing tax regime raise questions about the financial viability of gaming companies like Delta Corp. The industry’s profitability is under threat, and this could have cascading effects on employment and revenue generation.

Final Remarks

Delta Corp’s mounting tax liabilities, culminating in the latest ₹6,384 crore tax notice, paint a grim picture for the company and highlight the pressing need for a reevaluation of the taxation framework in the gaming industry.

The conflict between the gaming industry and tax authorities over the basis of taxation underscores the need for comprehensive and balanced tax policies that consider the industry’s dynamics and the interests of players and stakeholders.

As Delta Corp and other gaming companies navigate these turbulent waters, the resolution of these taxation challenges is of paramount importance to the industry’s sustainability and growth.