Online Gaming Industry to decline after 28% GST on Full Face Value, forecasts Lumikai/Google report

Online real-money gaming (RMG) is set to decline drastically in India after the government changed the GST norms and decided to impose a 28 % tax on the industry on the full face value of user collections.

On Thursday, a report by gaming venture capital firm Lumikai said that it forecasted that the industry will grow at a Compound Annual Growth Rate (CAGR) of 20% between the Financial Year 2023 and Financial Year 2028 to achieve revenues of $7.5 billion.

The report by a gaming venture capital firm, prepared in collaboration with Google, said that while the real-money gaming category will remain quiet, most of the growth will come from in-app purchases and advertising revenues.

In the Financial Year 2023, RMG revenue grew by 33%. After the new taxation policies, We suppose RMG growth to slow due to heavy tax liabilities and consolidation in the industry.

The size of the overall gaming industry is estimated at $3.3 billion in the Financial Year 2023 compared to $2.6 billion last financial year. According to the report, the continuous increase in engagement has contributed to the growth of the Indian gaming industry.

This year, gamers’ numbers grew by 12 %. The average time spent per user per week has increased compared to last year and it is indicating a growing propensity to play games.

India is one of the top countries in the world in terms of total mobile game downloads with 15.4 billion downloads.

According to a report the population of gamers in India stood at 568 million in 2023 against 507 million in 2022 and 450 million in 2021. The average time spent on gaming per week was 10 to 12 hours in FY23, while it was 9 to 11 hours in FY22.

Nowadays, a maximum of 4.7 hours per week is spent on real-money gaming, while other gaming accounts for about 3 hours. The time spent on RMG is now going to reduce as the category has lost its radiance after the change in GST rates.

India’s gaming story is evolving, with various ecosystems supporting growth. The rapid improvement in digital infrastructure and India’s growing status as a game development hub bodes well for the industry.

Funding has declined, reflecting global activity; But direct investment by strategic investors like Mixi, Sony, and Krafton points to a positive point of view.