Delta Corp Shares Jump Over 15%

Shares of Delta Corp surged by 15.4% on Friday, reaching ₹130.8 on the BSE, after the Supreme Court (SC) stayed show-cause notices issued by GST authorities to online gaming companies. The notices had demanded a total of ₹1.12 lakh crore in tax dues. This decision offers temporary relief to the gaming industry, which has been under significant financial strain following the GST demands.

The Supreme Court's two-judge bench, comprising Justice JB Pardiwala and Justice R Mahadevan, postponed proceedings on the matter until the final hearing, scheduled for March 17, 2025. During this period, the GST authorities will not be permitted to enforce the tax demands or proceed with penalties.

Relief for Online Gaming Companies

The apex court’s intervention has come as a respite for online gaming platforms like Gameskraft and Games 24x7, which have been contesting the applicability of a 28% GST rate. The companies argue that the higher tax rate should only apply from October 1, 2023, when the GST Council amended the law. However, the government contends that the amendment merely clarified an existing law, making the tax demands applicable retrospectively.

The Directorate General of GST Intelligence (DGGI) had raised show-cause notices to 71 online gaming firms for the fiscal years 2022-23 and the first seven months of 2023-24. The total tax demand stood at ₹1.12 lakh crore, with penalties potentially pushing the figure to ₹2.3 lakh crore.

In August 2023, an amendment to the CGST Act imposed a 28% GST on the full face value of bets placed on online games, regardless of whether the games involved skill or chance. This amendment faced pushback from industry stakeholders, who warned of its damaging effects on the online gaming ecosystem.

Market Reactions

The Supreme Court’s decision not only benefited Delta Corp but also provided a boost to shares of Nazara Technologies, another player in the gaming space. Nazara’s shares rose as much as 8.48% to ₹1,075 during intraday trade.

Delta Corp, a company involved in gaming, hospitality, and real estate, operates three prominent casinos in Goa under the DELTIN brand: Deltin Royale, Deltin JAQK, and Deltin Caravela. Despite Friday’s rally, the company’s stock performance has been lackluster in recent months, with a 19% decline over the past six months and a 58% drop over the last three years. Its market capitalization currently stands at ₹3,167 crore.

Background of the Case

The GST controversy began with a Karnataka High Court ruling in May 2023, which quashed ₹21,000 crore worth of tax notices issued to Gameskraft. However, the Supreme Court stayed this ruling in September 2023, escalating the matter to a national level.

Conclusion

The Supreme Court’s stay on GST proceedings provides much-needed breathing space for online gaming companies, allowing them to continue operations without the immediate burden of massive tax demands. However, the issue is far from resolved, with the final hearing slated for March 2025. Until then, the industry will remain in a state of cautious optimism, awaiting clarity on the tax regime that will shape its future.