Delta Corp shares tank 16%. What’s triggering the sharp selloff?

Shares of gaming company Delta Corp plunged as much as 16% to an intraday low of Rs 68 on the BSE on Friday after the Supreme Court upheld the government’s retrospective 28% GST levy on online gaming companies.

The apex court on Wednesday ruled in favour of the government’s position, holding that online gaming platforms cannot be treated merely as intermediaries and that such activities amount to actionable claims under GST law. The court also said that the amendments validating the levy were clarificatory in nature and would apply retrospectively.

Online gaming firms had opposed the retrospective tax demand, arguing that the government’s interpretation of “gambling” under GST law goes against more than six decades of legal precedent set by the Supreme Court and various high courts.

The dispute traces back to amendments made to the CGST Act in August 2023, which brought online gaming under the same taxation framework as betting and gambling activities. Prior to these amendments, games of skill were treated separately from gambling for tax purposes. The revised rules imposed a 28% GST on the full face value of entry amounts paid on online gaming platforms.

The ruling carries major financial implications for the industry. The Directorate General of GST Intelligence (DGGI) had issued tax notices worth nearly Rs 1.12 lakh crore to 71 online gaming companies. Legal experts estimate the total liability, including penalties and interest, could rise to around Rs 2.3 lakh crore.

In an exchange filing, Delta Corp said that based on the limited information currently available following the Supreme Court’s pronouncement, it understands that the method it has followed since October 2023 for calculating GST revenue would now apply retrospectively for the July 2017 to September 2023 period as well.

The company said this would be a favourable outcome because GST would not be levied on the gross bet value of all games played during the relevant period, which would have significantly inflated both revenue calculations and tax liability. Instead, GST would apply only on the amount received from players for chips sold to them.