Zoe Sharp
September saw casino operator Delta Corp Limited receiving several Goods and Services Tax (GST) shortfall notices, with the company and its affected subsidiaries later filing writ petitions that challenged the said notices. During a hearing this Monday, the Bombay High Court made the decision to instruct the Directorate General of GST Intelligence (DGGI) to not pass a final order. Instead, the final hearing will be left for November 5, 2024.
The first two notices were sent by Hyderabad’s DGGI, and they amount to more than Rs 16,000 crore in total, with the allegations encompassing a time period starting July 2017 up until March 2022. Another notice alleging that tax evasion has been committed was sent by the DGGI of Kolkata in October to a subsidiary of Delta Corp Limited, and this time, the amount addressed was over Rs 6,384 crore.
Delta Corp Limited Used its GGR as the Basis for the Tax Payments
According to Delta Corp Limited’s senior advocate, Harish Salve, the taxes the company and its subsidiaries paid during the periods highlighted in the notices were based on the entities’ Gross Gaming Revenue (GGR). A clarification on what GGR encompasses was also made.
In addition, Harish Salve also pointed out how petitioners have challenged the Central GST Rule 31A of the 2017 legislation, according to which taxation must be based on a bet’s base value as opposed to the GGR. It was emphasised in the filings that this way of taxing gambling companies has been a serious problem for India’s gambling industry. In addition to Rule 31A, the Central GST Act’s section 15(5), along with notifications and circulars that also have to do with the said act, were also challenged, as announced by Justice M.S. Sonak and Justice Bharat P. Deshpande.
The Newest Changes to GST Legislation Bases Tax Rates no the Base Bet Value
Legislation surrounding India’s Goods and Services Tax was put into effect in 2017, and it has since gone through multiple amendments, especially in regards to the way gambling activities have been taxed. The latest changes were made in 2023, which essentially led to an increase of 28% to the GST rate when it comes to all forms of gambling.
Previously, it was only games and gambling activities in general that were luck-based needed to adhere to a GST rate of 28%. Skills of chance, on the other hand, had to pay taxes based on a GST rate of 18%. It is also dictated that the new all-encompassing 28% GST rate will not be based on the GGR of a company, and will instead be affected by the base value of online bets. The government put these changes into effect on October 1, 2023. These changes have been a point of contention among industry players, with many maintaining that their application will be harmful to India’s iGaming sphere.