New frontiers - Navigating the evolving landscape for online gaming in India

The online gaming segment in India has seen remarkable growth with immense economic potential. The country boasts a substantial gaming community, comprising 42.5 crore¹ gamers, the second largest globally after China. The sector holds the potential to boost Foreign Direct Investment (FDI) inflows, employment, and investments in various sectors. It will also catalyze ancillary sectors like fintech, cloud services, data analytics, and cybersecurity.

From FY20 to FY23, the online gaming segment in India experienced a notable CAGR of 28% culminating in a market size of INR16,428 crore in FY23. Industry estimates suggest it will reach INR33,243 crore in FY28, showing a 15% CAGR². 

The segment has attracted consistent investments totalling INR22,931 crore³ between FY20 and FY24 YTD from both domestic and foreign sources. Furthermore, it directly and indirectly employs around one lakh individuals, with the prospect of expanding to 250,000 job opportunities by 20254⁴. 

The real money gaming (RMG) sub-segment constitutes a substantial part of the online gaming ecosystem, comprising 82.8%⁵ of the market share in FY23, with more than 400 RMG start-ups⁶. Industry estimates this sub-segment to contribute around INR6,500 crore-INR6,800 crore⁷ as direct tax revenues (comprising TDS and corporate tax), and INR75,000-INR76,000 crore⁸ as indirect tax revenue (GST) to the exchequer during FY24−28E.

The Intermediary Guidelines and Digital Media Ethics Code Rules, 2021 (online gaming rules) for online gaming issued by the Ministry of Electronics and Information Technology (MeitY) is perceived by many in the industry as progressive. These guidelines aim to remove ambiguity, bolster investor sentiment, attract funding and encourage innovations in India’s digital economy while prioritizing user safety. 

During the 50th GST Council meeting, the Group of Ministers (GoM) suggested to increase the tax rate on online gaming to 28%. Further, due to a lack of consensus on the valuation base, the final decision on this was left at the behest of the GST Council. Consequently, in the 51st GST Council, decisions on implementation of increased rate and value along with the proposed changes in the GST law were finalised⁹.  

Measures such as raising awareness, setting limits based on various factors, implementing age restrictions, and other strategies can help in addressing addiction. 

This report presents an overview of the online gaming segment in India, encompassing its influence on the Indian economy. Further, it delves into the regulatory framework - MeiTY regulations, GST changes and the strategic endeavors for ensuring the segment’s sustained growth.