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The gambling sector at large – be it poker, rummy, lottery, fantasy sports, horse racing, and now even casinos are increasingly coming under the eye of the authorities especially on suspicions of tax evasion. After the Calcutta High Court turned down the plea of four lottery operators seeking that lotteries be exempted from GST last October, just months later, the Mumbai police raided several bookmakers operating inside Mahalaxmi racecourse for alleged GST evasion.
Two weeks back reports came in that the Indirect Tax Department was questioning some of the top online fantasy gaming firms including industry leader Dream11 to crosscheck possible revenue leakage in the manner they compute and pay GST.
Director-General (DG) GST Intelligence now seems to have trained its guns on India’s only BSE-listed gaming company – Delta Corp. In latest reports, DG – GST Intelligence has booked Delta Corp and its subsidiary Highstreet Cruises for GST tax evasion amounting to ₹6,189 Crores. The news triggered investor panic resulting in Delta Corp’s share price falling by 6.99% on the BSE on Friday, down ₹16.05 to close at ₹213.45.
Delta Corp, however, is yet to make an official statement on the report but CNBC-TV18 in its tweet dated May 10 quoted Delta Corp CFO, Hardik Dhebar, as denying all allegations of GST evasion. “We are in compliance with GST Laws and have not evaded any GST,” Dhebar is reported to have stated.
— CNBC-TV18 (@CNBCTV18Live) May 10, 2019
The CNBC – TV 18 report has quoted Central Board of Indirect taxes and Customs (CBIC) sources as claiming that both the companies (Delta Corp and its subsidiary) evaded GST by camouflaging a mixed supply of services.
The primary bone of contention in the matter remains how GST applies to the gaming industry. The industry at large pays 18% GST on the revenue (rake or commission) collected by them while the Tax authorities have repeatedly argued that the same should be basis the gross value of the bets placed.
The reported investigation being carried out by the DG-GST Intelligence into possible GST evasion by Delta Corp also builds on same logic – that the company paid GST on the net revenue, instead of the gross value of bets.
Delta Corp – An Uncertain Road Ahead?
Delta Corp operates three offshore casinos in Goa through its subsidiary – Highstreet Cruises. The company’s Casino arm accounts for a substantial portion of Delta Corp’s revenue. Despite the Goa government hiking the casino license fee for the fourth consecutive year last year, the company’s casino segment continued to post impressive growth.
Looking at the company’s growth chart, last year in October, Delta posted double-digit profit growth in the fiscal quarter Q2 ending September 30. The company’s reported Q2 net revenue was to the tune of ₹2 Billion, a marked 39% improvement over the same period last year. Delta’s share price saw a 2% dip on the BSE despite strong revenue inflow in the quarter ending December 18. This year, Delta Corp reported consolidated net profit growth of 25.35% or ₹56.72 Crore for Q4. Overall, Delta Corp saw its profit improve by 26.49% to ₹196.76 Crores for the financial year ending March 2019.
Nonetheless, several factors have placed immense pressure over Delta Corp`s future prospects. For one the competition from other offshore casinos in Goa is getting stiffer with both Big Daddy and Pride bringing in bigger ships to Mandovi in a bid to bite into Delta`s Casino market share. There is also political uncertainty hanging over the Casino business at large with the election results in Goa expected on May 23. A change in political guard in the state could swing the fortunes of Delta Corp and other Casino companies either way.