2 hours Ago By Gargi Sarkar
Despite the industry's anticipation, the promised "review" of a hike in the GST rate on services from 18% to 28% on deposits remained unfulfilled Some industry executives, however, have very little hope that the government would announce anything with regard to taxation in this budget Startups in the core online gaming segment are increasingly reliant on industries such as AI and semiconductors for game development and hardware capabilities Mounting regulations and rising tax loads have been weighing heavy on online gaming, particularly in the real-money gaming (RMG) space. The industry, however, stayed in the game with hopes of a relief running high in the run-up to Finance Minister Nirmala Sitharaman’s Union Budget speech tomorrow (1 February). After the Union Budget 2023-24 fell short of expectations with no specific mention of online gaming or policies aimed at addressing its concerns, the industry hopes that the FM will this year help it secure regulatory clarity and move along the growth path.
Despite the industry’s anticipation, the promised “review” of a hike in the GST rate on services from 18% to 28% on deposits remained unfulfilled. This uncertainty has left stakeholders grappling with a lack of clarity in direction. The sector turned vocal about a slash in the GST rate as the budget neared.
The stakes are high as illegal betting platforms have seen a surge in transactions, amounting to INR 8.2 Tn, while users continue to migrate to offshore platforms due to the increasing tax burden on domestic operators. An Ernst & Young and USISPF report had earlier projected that the online gaming sector would create 250,000 jobs by 2025, but in the new tax regime, this estimate has been hacked to just 30,000.
A staggering 83.3% of companies are now facing significant challenges in expanding their workforce. While real-money gaming companies bear the brunt of these tax policies, sectors like video gaming may have different expectations, as online gaming stakeholders will also be keenly monitoring the developments in industries such as semiconductors, AI skilling, startup taxation, and customs duties on tech components – sectors that could indirectly impact the gaming ecosystem.
As the Union Budget 2025-26 is now just a day away, it’s time to take another look at the wish list of the online gaming companies. The real money gaming sector is focussed on a single issue till now: the 28% GST on first-time deposits made by registered users. This rate, which applies uniformly to both skill-based and chance-based games, has replaced the previous distinction where skill-based games were taxed at 18% and chance-based games at 28%.
As per experts Inc42 spoke to, the gaming industry’s key expectation is that the government revisit its current stance and lower the GST rate on skill-based games to 18%, aligning it with the tax framework applied to other service sectors. In 2024, India’s online gaming industry showed a high rate of growth, overcoming regulatory challenges and the impact of the 28% GST levy. Despite these hurdles, the sector has exceeded the expectations, reaching $3.
8 Bn in revenue in FY24, according to Roland Landers, chief executive of industry body All India Gaming Federation. Landers hopes that the government will consider reducing the GST rate and addressing retrospective taxation issues. Such steps would provide much-needed clarity and create an environment conducive to further growth and innovation in the sector.
“While we are absorbing the impact of the increased GST, we’re also exploring international markets for growth. However, India remains our top priority due to its potential as the leading gaming market. The growth of this sector in India is vital, and any policy changes here will significantly influence its future,” an executive with an RMG startup said.
Some industry executives, however, have very little hope that the government would announce anything with regard to taxation in this budget. Startups in the core online gaming segment are increasingly reliant on industries such as AI and semiconductors for game development and hardware capabilities. As a result, they are closely monitoring any announcements or developments from these sectors that could have an impact on their growth and innovation.
“We hope to see measures that accelerate the growth of India’s gaming and e-sports industry. Incentives for semiconductor design and manufacturing could bolster the tech ecosystem and elevate gaming hardware standards. Similarly, tax relief for middle-income groups could boost disposable income, creating opportunities for studios to develop India-centric gaming IPs,” Akshat Rathee, cofounder and managing director of NODWIN Gaming, said.
Initiatives supporting AI skills for rapid game deployment and quality assurance would play a pivotal role in keeping pace with global advancements, enabling faster development cycles and enhancing game quality. With cross-platform gaming and e-sports gaining significant traction in India on the back of increasing demand for seamless experiences across mobile, PC, and console platforms, gaming PCs are also becoming increasingly important. According to Vishal Parekh, chief operating officer at CyberPowerPC India, PC gaming titles are likely to be a part of the Olympic Esports Games 2025, there’s an unprecedented opportunity to position India as a global gaming powerhouse.
Provisions such as reduced customs duties on gaming hardware, tax incentives to foster growth, and investments in digital infrastructure could enhance accessibility and affordability for gamers across the country. “Supporting the adoption of high-performance gaming PCs would not only fuel India’s gaming culture but also boost our chances of securing medals in global esports tournaments,” he said. To develop gaming and e-sports as a mainstream economic force, the government should prioritise incentives for IP creation, reductions in TDS on digital platforms, and tax benefits for gaming and e-sports companies, Rajan Navani, founder and chief executive of JetSynthesys, said.
Navani pitched for policies that support content creators with grants and infrastructure for production and distribution, stating that these can amplify India’s influence in the global content economy. Milind D Shinde, founder and chief executive of 88 Games, echoed him. “In 2025, we hope to see further incentives for gaming studios, particularly those developing Made-in-India games which reflect our unique culture and stories on a global stage.
Enhanced investment in AVGC XR infrastructure, tax benefits for gaming startups, and support for training initiatives in gaming design and development can position India as a global hub for gaming innovation.” FM Sitharaman had announced the establishment of an Animation, Visual Effects, Gaming, and Comic (AVGC) task force in her Union Budget speech in 2022. The task force was officially set up two months later under the Ministry of Information and Broadcasting.
In December 2022, the task force proposed the formation of a national AVGC Mission with a dedicated budgetary outlay to promote the sector. There has been no update on budgetary allocation yet. The Union Cabinet last year cleared the setting up of a National Centre of Excellence (NCoE) for animation, visual effects, gaming, comics, and extended reality (AVGC-XR) with an eye on creating IPs for domestic consumption and global outreach.
“The government’s focus on advancing the AVGC sector is promising, and we look forward to increased funding and policy support for this initiative,” AIGF’s Landers said, reflecting the expectation of a large segment of the gaming industry. [Edited by Kumar Chatterjee].
