• Notification Date: 07-12-2024
• Notification No: N/A

Online Gaming Industry Faces Major Setback After 28% GST Execution

A year after the government imposed a Goods and Services Tax (GST) of 28% on the full face value of online gaming, the sector is facing serious struggles with notable challenges. The new authority of tax, which was introduced in October 2023, has led to a keen slowdown, specifically in the segment of Real-Money Gaming (RMG). While the overall online gaming sector continues to grow, revenue from RMG has dropped by 20-30% in FY24. Previously growing at an annual rate of 25%, the RMG sector is now projected to expand by just 8% between 2025 and 2028.

The primary issue is the steep rise in operational costs, which is driven by a 300-400% increase in the GST burden. As a result, gaming platforms have been forced to absorb these costs, leading to a 50% reduction in profit margins. This has suppressed innovation, user acquisition, and long-term sustainability. The impact is especially harsh on start-ups, with more than 25% of them shutting down in the wake of the GST hike, and many others facing layoffs and reduced investments.

Meanwhile, various users are turning to offshore betting platforms that operate outside India's legal and regulatory framework, causing a notable loss in GST revenue. These platforms are estimated to receive deposits worth ?8.2 lakh crores annually, resulting in a GST loss of ?2.3 lakh crores each year. This migration not only hampers the growth of the domestic industry but also exposes users to higher risks, including irresponsible and fraudulent gaming.

Despite a 340% increase in GST revenue from the industry, experts warn that the long-term growth of online gaming in India will depend on clearer regulations and a review of the tax policy.