Additional 2400 crores gst demand from subsidiaries
Credits : #BeatTheStreet
I just want to ask and add a logical perspective.
Assuming someone with âš10,000 buys casino chips at their Casino
Then s/he would get chips worth âš7,812.50 (âš2,187.50 being the 28% GST component)
Now the very next minute the same person returns and demand refunds for this purchase
So now
Situation 1) the casino returns only âš7,812.50 to this person and not the GST component
Or situation 2) the casino returns the whole âš10,000 amount which is inclusive of GST.
What the Delta Corp has explained to its investors on Concall is that it follows the 2nd Option, that it refunds the Whole âš10,000 inclusive of GST (because here the exchange is merely a transaction and not actual the supply)
So the GST shall be applicable only on the Net Revenue they earn after giving refunds (or prize winnings) to these customers, so this is called Gross Gaming Revenue (GGR) and this is a standard practice which is followed worldwide.
Now the IT department is asking the GST dues based on the 1st Situation.
That is if the customer asks for refund the customer wont get the GST portion back, and based on that logic they have demanded such a huge amount.
Based on this understanding I donât think IT department would ever succeed in their case against the company.
And anyways if they ever succeed how can they expect to recover Approx 17k Crores worth of dues when companyâs net worth itself if 2.2K crores and market cap of 4.5K crores.
(Company also faced similar 6K crore tax notice in 2019 and later denied the allegations)
So as warren Buffet says be greedy when others are fearful, so is this time to be greedy in this stock, when the price falls on Monday 25/09/2023 ?
11 Likes
Income tax ,gst department is always meant to harass ,loot people. They always think in terms of target, how can they get 5x-10x tax this year. If these would be the situation, none of the industries would survive in india. Its bound to happen in all regulatory industries i.e. brokerages (angelone, zerodha, NSE) , banks, liquor, defence. One always have to think twice in investing in these industries as risk can come in form of regulation change , gst etc . as they are bound to receive gov. poking every now and then. In this regard, Chanakya, in a very smart way, quoted the example of the honey bee, saying that: âGovernments should collect taxes like a honeybee, which sucks just the right amount of honey from the flower without causing any harm.â
4 Likes
Is it true âŚeven to appeal against demand notice in high court, company will need to deposit 10% of the amount?
https://twitter.com/abhishekrajaram/status/1705623748479455275?t=g0hHjI_0N4rUaRkp4pvShw&s=19
Why the near Rs 17,000 crore GST demand on Delta Corp sounds incredulous but there could be areas of grey - Article by Sonal sachdev
2 Likes
I think there are lot of moving parts in this company as of now. What I m sharing is what I have heard around :
- These business have lot of offline transactions mostly hawala. Even if u visit a casino, u can buy chips in cash and also then encash your winnings back in cash. The white part is miniscule to the money which floats around.
- Lot of casinos have cropped up around deltin which was not the case earlier and the competition has increased manifold atleast in Goa. So there can be a rival in cohoots with all this also. Because the other big player Big daddy is run by haryana MLA gopal goyal Kanda who is supposedly close to the ruling dispensation.
- I am still not sure about the breakdown of the GST claim 17000 cr. What % of that is online and what % is the casino one. Can anyone throw light as how can IT or GST dept determine the GGR. Do they check the billing counter receipts or check number of people coming or check video cameras.
- This whole GGR thing is useless as it kills a nascent industry which just doesnât make sense. Babus should apply themselves before coming with such silly ideas.
Best
Divyansh
1 Like
Will love to accumulate this stock if gets hammered, I think the tax demand is ridiculous, this is probably the worst that could possibly happen to the company and if they survive this they will probably have the experience of a management who has dealt with the worst regulations, a fully speculative investment if it gets hammered will probably take the gamble.
2 Likes
Itâs amusing how you plan on gambling on a gambling business whose business itself has become a gamble for now.
10 Likes
I have exited today. If they lose the case, itâll wipe off the entire company. If they win, itâll take a couple of years for the judgement to come. With so many other companies to invest in, I donât see the point in hanging around here for the law to take its course. Cheers.
12 Likes
I think company will survive but stock will go to sleep till the tax overhang stays. Staying invested for the long haul.
2 Likes
Ya totally agree with your view
Hum rahe ya na rahe, market jarur Raheja
1 Like
I donât know what the government is trying to achieve by doing all this drama? They are asking for 25000 crore taxes from a company whose net profit was 142 crore last year !
2 Likes
I am sure there is more here which meets the eye. Can this be the case of large players lobbying with the govt and weeding out the small players. Imagine the amount of small players which had cropped up from past few years and the industry had witnessed phenomenal growth. Once this phase of consolidation sets in, the small players will shut shop. The big players will take a hit but will come back to larger playfield and to reign for years to come. At this point all this might be a conjecture and subjective imo. But for sure the supply side will get pretty limited once the situation normalises ( if it does). i m focusing on the longevity of the industry, the players which might survive and subsequently the profitpools once this storm passes away.
best
divyansh
disc: interested and waiting for dips to add
2 Likes
If I apply a risk-reward framework, it appears that the risk outweighs the reward. Iâm uncertain about how long the money could stuck here and Moreover the company now will be focusing more on fighting the cases in the court rather than focusing on business.
Thoughts?
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I agree. Risk seems high even now. And it will be a big management distraction. Also, their go-to man and CFO, Hardik Dhebar is gone. I wonder if he sensed something like this was coming.
2 Likes
Never ending story. Another tax demand of 6384 crore for Deltatech gaming.
https://twitter.com/CNBCTV18Live/status/1713132911715893542?t=rANP8A9hDvWGM1NfkoF1UQ&s=19
1 Like
Yeah! had exited with 20% loss, will get opportunity when the dust settles.
1 Like
I visited delta corp recently âŚfootfalls have dropped drastically. This is when two big casinos are on maintenance and not operating. Weekends felt like weekdays and it sure felt like a stranded abandoned town. The poker room had some cash festival and it looked that cash transactions have taken over completely. So results for this quarter from oct will be dismal for sure. This pain period for sure will ensure consolidation in the industry. Pain duration is a uncertainty as of now and thats what will test investors patience here.
Best
Divyansh
Disc : tacking position
6 Likes