India’s new GST regime for online gaming now ranks among the most burdensome indirect tax regimes globally posing risk to industry growth and significant revenue loss
Navigating the GST increase
This tax burden is largely being shouldered by the gaming companies to compensate the users in various forms for the increased tax, placing immense pressure on the sector. In FY24-25, the sector experienced a significant degrowth, with projected revenues after accounting for the GST burden dropping by 20-30% as per industry sources. Industry experts estimate that approximately 25% of real money gaming companies have shut down over the past year, and many others are struggling with customer retention, and overall sustainability.
The Growing Financial Strain on the Industry
The online gaming sector, which is still in its early stages of growth, is facing an existential crisis. In stark contrast to the Rs 22,000 crore of investments attracted by the industry since FY19, there has been a notable decline in fresh investment over the past year from over USD 1200 million in 2021 to about USD 16 million in 2023. This is a significant blow to an industry that had previously been growing at a compound annual growth rate (CAGR) of 25%. An alarming 55% of the industry’s annual revenue is estimated to be allocated toward navigating the GST related impact, severely impacting both financial health and growth prospects. The unit economics have dropped by more than 50% as less money is available for the prize pools.
