Courts in Goa and Sikkim Freeze GST Action against Delta

26 Oct 2023

The Bombay HC at Goa Orders Gov’t to Refrain from Final Action

The High Court of Bombay at Goa has ordered the Government not to issue final orders on the GST collection demands recently sent to Delta Corp and its subsidiaries amounting to more than ₹23,200 crore without prior approval by the court.

“The Hon’ble High Court of Bombay at Goa considered the writ petitions filed by the Company and its subsidiaries on 23rd October 2023,” Delta Corp stated in a stock exchange regulatory filing on 24th October.

“Basis a statement made on behalf of the concerned tax authorities, the Hon’ble High Court has directed such authorities not to pass any final orders on the captioned show cause notices without the prior permission of the Hon’ble High Court. Dates have been fixed for completion of pleadings and the hearing and final disposal of such writ petitions,” the statement added.

“This statement about not passing any final orders on the impugned show cause notice is accepted, and the concerned respondents will have to abide by the same,” the bench comprising Justice M.S. Sonak and Justice Bharat P. Deshpande stated, observing that the GST Enforcement arm of the Union Government in the face of the Central Board of Indirect Taxes and Customs (CBIC) has acknowledged the court’s direction.

Delta Corp has Challenged the Allegations and the Law

As per reports, India’s sole listed casino operator has not only challenged the various demand notices and circulars by the CBIC and the DGGI (The Directorate General of GST Intelligence, the enforcement unit under the CBIC) but has also contended Section 15(5) of the Central Goods and Services Tax Act, 2017 (CGST Act), and Rule 31A of the Central Goods and Services Tax Rules, 2017 (CGST Rules).

The challenged Rule 31A(3) states that “the value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100% of the face value of the bet or the amount paid into the totalisator.”

Before 1st October 2023, certain games like poker and rummy offered on the online platforms of Delta’s subsidiary Deltatech Gaming were generally held to be games of skill and not involving betting and gambling, unlike roulette, baccarat and other games considered to be of chance and offered only at the live dealer tables at the operator’s floating casinos in Goa.

The amendments to GST legislation adopted by Parliament this August on the recommendations of the GST Council removed any differences in tax treatment between games of skill and games of chance, which led to egregious tax evasion allegations against homegrown gaming companies who had been offering online money games taxed as games of skill since 2017.

The Sikkim HC was the First to Stay GST Enforcement

A few days before the Bombay HC decision, the High Court of Sikkim stayed a ₹628 crore GST demand by DGGI Hyderabad against the company’s subsidiary Casino Deltin Denzong, which operates Delta’s brick-and-mortar casino in Sikkim.

“Pursuant to a writ petition filed by the Company before the Hon’ble High Court of Sikkim challenging the above demand, the Hon’ble High Court has by its order dated 20th October 2023 ordered status quo to be maintained in respect of the demand until the date of next hearing,” Delta Corp announced.

Delta stock climbed by 5% on October 25 after the Bombay HC at Goa decision was circulated on the backdrop of losing 22% of its value within one month and reaching a 52-week low the previous week.