Tax claims are arbitrary, vague, contrary to law and highly defendable: Delta Corp CFO Anil Malani

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In a recent interview, Delta Corp CFO, Anil Malani talked about the recent changes to the GST regime, tax notices handed to the company by the Director General of GST Intelligence (DGGI) and its effects on the company. Here are the highlights of what Malani said –

Investor confidence after tax notices

Asked about the recent tax demand notices and investor sentiment, Malani explained that prior to the introduction of GST, the casino companies of the group used to pay entertainment tax at 15% on gross gaming revenue.

The rate was changed after GST came into effect, increased to 28%. Despite that the company paid its dues at a higher rate. Then came a notice related to the horse racing business which stated that the GST should be calculated on gross bet value.

This created issues for the company. It had several meetings with various bodies in the last three years, explaining how that was not the right way to tax and the globally used methodology is the gross gaming revenue. A group of ministers (GoM) was also formed to look into the matter and the GST Council decided to impose 28% tax on full face value for real money gaming in July this year.

With the new GST rate coming into effect, offline and online real money gaming firms started receiving tax notices. This also included Delta Corp’s casino businesses too which have been handed notices amounting to over Rs 16,000 crore.

The company has been paying tax based on gross gaming revenues, but the government has now come up with their own method to levy new tax on gaming, resulting in the issuance of these notices, Malani said in the interview with The Economic Times.

The legal team has advised them that the tax claims are “pretty much arbitrary” and “highly defendable”.

Impact on company

On being asked about the effect of the ongoing matter on the company’s working capital and the time-frame to get some clarity on it keeping in mind the investors, Malani said that these tax claims may not stand in the court of law. However, the company will abide by the new GST rate implemented from October 1.

Since its implementation, the company has not seen any drop in the number of visitors in the last 15 days, however, there has been a slight decline in revenue in the same period. According to Malani, this is mainly due to the new GST regime which is pushing visitors to buy in small lots as per their needs. As of now, the company is simply observing the developments as it has only been over a week since the implementation of new rate.

Current business standing

Malani also revealed that there was a marginal decline in revenue QoQ, it was mainly due to the hospitality business. The gaming side of the company’s revenue, in fact, went up slightly by 3.5%.

Profit after tax (PAT) stood at Rs 69 crore as compared to Rs 68 crore in the last quarter, making it the best-ever quarter for Delta Corp. Also, their vessel Deltin Royale is also celebrating its 10-year anniversary at present, Malani said.

Delta Tech gaming IPO

Talking about the Delta Tech gaming IPO, Malani said that there are some uncertainties surrounding the business which will stop any investor from participating in a fundraising activity. The IPO plan, as a result, is on hold.

Plus, there are obviously going to be court proceedings in relation to the matter which, Malani believes, will hopefully be in their favour. The company then plans to launch the IPO with a strong valuation.

Negative impact on footfalls and online revenue?

Malani reiterated that the footfalls have not been affected in any way. In fact, visitor numbers to Goa saw an increase recently. However, what is affected is the people’s willingness to spend under the new GST regime.

Nevertheless, Malani said the company will adapt accordingly and will definitely be back on a stronger footing soon. When it comes to the online businesses, the plan was to get into an IPO mode and grow the business, the CFO added.

The online entity had started to diversify from poker to rummy to other multi-gaming platforms. With the GST rate changes, the company had to dial down the expansion efforts a bit. However, it still managed to remain profitable compared to last quarter.

Malani believes that the online business will remain profitable, but it will have to “wait and watch” to formulate its own plans.