GST shocker: Delta Corp, Nazara Tech stock prices tank
Online gaming platform Nazara Technologies and casino operator Delta Corp Ltd. witnessed a sharp fall in share prices on Wednesday. While the former is down 4.6% to Rs. 674 per share, the latter has tanked 19.98% to hit the lower circuit at Rs. 197.4. The fall comes as a result of the GST Council's decision to levy 28% GST on online gaming and casinos.
No distinction between skill and chance-based games
Yesterday, Union Finance Minister Nirmala Sitharaman announced that 28% GST would be levied on online gaming, casinos, and horse racing. This tax will be charged on the "full face value" and would be applicable uniformly, without making any distinction between games that require skill and those that depend on chance. Industry insiders have described the move as "catastrophic."
How has Delta Corp been affected?
As the GST Council has raised the tax rate on casinos from 18% to 28%, Delta Corp is staring at tough days ahead. Its stock prices have gone down in three out of the last four trading sessions, and today, registered its biggest-ever one-day drop. The company is facing an F&O ban, and its market capitalization has gone down by Rs. 1,600 crore.
Nazara is sure of minimal impact
Strangely, Nazara Technologies does not seem too bothered about the GST hike. The company has claimed that the 28% rate will solely apply to the skill-based gaming segment of its operations. "Skill-based gaming segment contributed 5.2% to FY23 revenue. We anticipate minimal impact on our overall revenue from GST rate hike," said the firm's management to CNBC-TV18.
What is the new tax's purview?
As per the amended GST law, the 28% tax will be applicable on the full value of bets placed during online gaming and the face value of chips bought at casinos. The full value of the bets placed in horse racing with the bookmaker or totalisator will also fall under the ambit of the tax.
What is the industry's view?
The Indian online gaming industry has an annual growth rate of 30% and accounts for 19.2% of global game downloads. The proposed increase in the GST rate will "prove catastrophic for the industry," as per the E-Gaming Federation. Due to the increased financial burden, 61 out of 100 e-gamers might discontinue playing, thereby leading to revenue loss for the companies.
