India’s fast-growing online gaming sector is facing significant headwinds, with regulatory uncertainty and high taxation posing serious challenges to its growth trajectory. Despite attracting substantial Foreign Direct Investment (FDI) and recording rapid revenue growth, industry players are concerned about unclear definitions of skill-based games versus gambling and fragmented state-level laws.
The situation has been exacerbated by the recently introduced 28% Goods and Services Tax (GST) on the total betting amount, which stakeholders say is disproportionately punitive. Industry experts warn this policy could undermine profitability, discourage startups, and force smaller companies out of the market.
Speaking to CNBC last month, Aruna Sharma, former secretary of the Ministry of Electronics and Information Technology (MeitY), emphasized the need for comprehensive reforms. She criticized the regulatory framework under the IT Amendment Rules 2023, stating that the formation of self-regulatory bodies (SRBs) was “a job half done” without a designated central regulatory authority to address industry concerns. Sharma also highlighted the lack of differentiation between games of skill and games of chance, which hampers the ability of legitimate domestic and international companies to operate seamlessly in India.
Growth Potential Amid Challenges
Despite these hurdles, the industry continues to draw investor interest due to India’s large, tech-savvy population and increasing smartphone penetration. The online gaming market is projected to grow at a compound annual growth rate (CAGR) of 20-25%, with revenues potentially exceeding $2.8 billion by 2024. Startups are driving innovation by leveraging technologies like blockchain and augmented reality (AR), while the rise of e-sports is helping shift public perception and expand the market.
Experts argue that a unified regulatory framework and a rational taxation policy are essential for unlocking the sector’s potential. “The distinction between skill-based games and gambling needs to be clarified at the national level to eliminate the current ambiguity,” said an industry representative.
While self-regulatory bodies are a step forward, experts agree that more decisive action is needed. With proper reforms, India could emerge as a global hub for online gaming. For now, however, the industry’s path to sustainable growth remains uncertain
