Delta Corp is India’s biggest online gaming company, and yesterday (10 January, 2024) its shares went up, even though the company is fighting a huge Goods and Services Tax (GST) demand notice from the government worth Rs 23,200 crore.
Delta Corp’s most recent quarterly financial data showed that its consolidated net profit fell 59% year-over-year to Rs 34.48 crore for the December 2023 quarter. Also, operating income dropped 18% to Rs 181.54 crore during the same time period.
The main reason for the drop in profits is the ongoing confusion surrounding the GST notices. There was optimism about Delta Corp’s future, though, as the share price went up by 5% in morning trade.
Breakdown of GST Notices Worth Over Rs 23,000 Crore
Delta Corp said in its exchange filing that the holding company and two of its entities got a “show cause” warning from the Directorate General of GST Intelligence (DGGI) Hyderabad on September 27, 2022. The notices were about GST.
The letter asks for a huge Rs 16,822.9 crore in GST debts that have not been paid since July 2017 until March 2022.
Additionally, another Delta Corp entity got a separate notice from DGGI Kolkata on October 28, 2022, seeking Rs 6,384.32 crore in GST dues from July 2017 to November 2022.
In total, GST authorities have slapped notices demanding over Rs 23,200 crore from the gaming firm.
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Delta Corp Disputes ‘Arbitrary’ Tax Calculation Basis
Delta Corp is adamant that the GST demands of several thousand crores are “beyond legal provisions” and made up for no reason.
The government wants to tax the company based on the gross bet value or face value of gaming transactions instead of the gross gaming income.
This question of how to figure out taxes has been a source of disagreement in the online gaming business for a long time. Delta Corp has already asked the high court to stay the notices and has filed writ cases to fight them.
Even though GST demand was huge, investors were still confident in Delta Corp’s strong growth chances in the world’s second-largest online gaming market.
But in 2024, the company will still have to deal with indirect tax warnings from several different agencies, which will cost them money and time.
Delta Corp keeps enough cash on hand—more than Rs 300 crore—to keep things running smoothly and deal with emergencies. But the final GST burden could hurt its business if it is applied to the past.
All eyes will be on Delta Corp as the case moves through the courts to see how it handles the biggest existential danger it has faced since it began, in 2010. The final decision will also set a standard for how the GST should regulate India’s growing online skill games market.