Courts in Goa and Sikkim Freeze GST Action against Delta

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. The order pertains to the GST collections demands recently sent to Delta Corp and its subsidiaries. These amount to more than ₹23,200 crore. The Court specified that the government must seek approval from the Court before issuing final orders. Read more: Court freezes GST Action against Delta.

“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. The statement added that the Court has fixed dates for completion of pleadings and the hearing and final disposal of such writ petitions.

“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, Delta’s subsidiary Deltatech Gaming offered certain games like poker and rummy on its online platforms. Authorities generally considered these games to be games of skill, not involving betting or gambling.. In contrast, roulette, baccarat, and other games were considered games of chance. These chance games were offered only at the live dealer tables at the operator’s floating casinos in Goa.

Amendments to GST legislation were adopted by Parliament this August. The amendments followed the recommendations of the GST council. They removed any differences in tax treatment between games of skill and games of chance. This change led to egregious tax evasion allegations against homegrown gaming companies. These companies had been offering online money games taxed as games of skill since 2017.

The Sikkim HC was the First to Stay GST Enforcement

“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. This increase followed the circulation of the Bombay HC at Goa decision. The stock had lost 22% of its value within one month. It had also reached a 52-week low the previous week.