Real Money Gaming (RMG) companies are anticipating 2025 to be a pivotal year for the industry, with hopes of government relief from the 28% GST that has significantly impacted both new-age startups and the overall ecosystem. Meanwhile experts state there’s been a surge of Rs 8.2 trillion in transactions on illegal betting and gambling platforms in India.
The India Gaming Market Report 2024 revealed that in FY23, $2.69 billion (86.7%) of gaming revenues in India came from pay-to-play models, out of a total $3.10 billion in the online gaming industry. The remaining revenue was generated through in-app purchases, advertisements, and other sources.
In July 2023, during the 50th GST Council meeting, online games—including skill-based and chance-based games—were placed in the 28% GST slab, which came into effect on October 1, 2023. Previously, skill-based games were taxed at 18%.
Finance Minister Nirmala Sitharaman announced in September 2024 that revenue from online gaming increased by 412%, reaching Rs 6,909 crore within six months. Meanwhile, casino revenues saw a 30% rise.
Saumya Singh Rathore, Co-founder of WinZO, commented, “While the impact of 28% GST on RMG, especially formats like casual skill gaming, has been devastating, there is significant hope that the government will take positive steps. They are open to meeting stakeholders and assessing the impact of high taxation on different formats within the RMG industry.”
She added, “Looking ahead, we hope for more inclusive dialogue between the government and diverse segments of the online gaming industry. This would help develop policies that reflect the sector’s diversity. Despite the challenges of the current taxation framework, the regulatory landscape is evolving. Through continued engagement and data-driven insights, we are optimistic the government will implement balanced taxation norms to enable legitimate gaming platforms to thrive domestically and compete globally.”
A recent report by Ernst & Young and the US-India Strategic Partnership Forum (USISPF) highlighted the impact of the 28% GST. Of the 12 companies surveyed, 20% of early-stage startups had to shut down, 40% stopped hiring, and 20% laid off employees.
Kazim Rizvi, Founding Director of The Dialogue, stated, “Retrospective taxation depletes investor confidence, hampers investment flow, and creates significant barriers for businesses of all sizes. A clarification from the government could give Indian companies more room to grow, innovate, and attract capital.”
According to the Ernst & Young and USISPF report, the online gaming sector was projected to create 250,000 jobs by 2025. However, due to the new GST regime, it is now expected to create just 30,000 additional jobs, with 83.3% of companies facing challenges in employment creation. Similarly, Foreign Direct Investment (FDI) in the sector has nearly stalled under the new tax regime, in stark contrast to the $1.7 billion FDI received in 2021.
John Joseph, Strategic Adviser at DeepStrat and Former Chairman of CBIC, remarked, “The online gaming sector is under immense stress due to the new tax regime, which has increased the tax burden by 350%. To avoid prolonged litigation and provide relief to this nascent sector, it’s advisable that the government clarify that GST between July 2017 and September 2023 be applied ‘as is’ at 18% on platform fees.”
Thirty petitions have been filed by RMG companies challenging retrospective GST demands exceeding Rs 1.5 trillion, calculated at 28% on the face value of bets. Of these, 27 pleas have been transferred to the Supreme Court from various High Courts. The original petition was filed by Head Digital, Play Games24x7, and Baazi Games, with the GST department also challenging a Karnataka High Court verdict.
Sujit Ghosh, Senior Advocate at the Supreme Court, stated, “Resolving this issue would eliminate the need for prolonged and costly litigation. From a policy standpoint, it would also curb user migration to unregulated offshore platforms. A stable tax regime coupled with regulatory clarity will foster responsible growth in the sector, ensuring user safety and discouraging participation in the black market.”
Beyond taxation challenges, RMG companies are urging the government to refine online gaming regulations to clearly differentiate between skill-based gaming and betting or gambling.