India’s online gaming market is expected to grow to Rs. 33,243 crore by FY28, but the real money gaming (RMG) segment will be under pressure in the wake of the 28% GST levy on the industry, according to a new report.
Consulting company EY’s latest report titled ‘New Frontiers: Navigating the Evolving Landscape for Online Gaming in India’ said India has a gaming community of about 42.5 crore gamers, the second largest globally after China. The entire online gaming market, after growing at a 28% CAGR from FY20-23 to Rs. 16,428/- crore, is projected to drop to a 15% CAGR till FY28.
The RMG sub-segment, a major contributor to the online gaming sector, accounted for 83% of the market share in FY23, with over 400 startups. But despite its dominance, the segment’s revenue share is expected to dip to 75.4% by FY28, due to recent GST amendments. Industry estimates this sub-segment to generate Rs. 6,500-6,800 crore in direct taxes and Rs. 75,000-76,000 crore in indirect taxes (GST) for the exchequer during FY24-28.
The government increased the tax rate on online gaming firms to 28% in September this year, a significant hike from the previous rate of 18% was implemented following recommendations from the 51st GST Council meeting.
The decision was notified by the finance ministry’s revenue department via an amendment to Central Goods and Services Tax, 2017. This change had a substantial impact on the profitability of online gaming companies, potentially leading to higher costs for consumers and a slowdown in industry growth.
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