Real Money Gaming Key Revenue Driver In India’s Gaming Industry: Report

Real money gaming (RMG) was the biggest contributor to the broader gaming space in India, consisting 83-84% of the overall revenue in FY22, according to a report by Grant Thornton Bharat.

In simple terms, real money gaming refers to the act of betting or investing, money or other alternative monetary entity in a game, and claiming prize amount to earn more than what was originally invested or placed on bet.

As per the report, ‘Guardians of safe play: Ethical gaming for Vibrant Bharat’, despite regulatory challenges, the RMG space has around 100 Mn online gamers daily, including 90 Mn paying to play and users spending an average of 8.5 hours per week.

Until last October, online gaming did not have a specific tax rate, and companies typically paid 18% GST on the platform fee or commission they took from the money pooled by users.

However, last year, the GST Council clarified that 28% GST would be charged on the entry fees paid by users, which significantly increased the tax outlay for gaming startups. The 28% tax is applicable on the full value of bets placed in online games, regardless of whether it involves games of skill or chance. 

The report further said that with the revenue standing high, tax implications seem to reflect a limited impact on the industry’s growth in the long run and this has drawn more investors attention to the gaming space.

The findings further projects the overall gaming sector to grow 20% by FY25, reaching INR 231 Bn.

Vishal Agarwal, partner and deals tax advisory leader at Grant Thornton Bharat, said, “Boosted by the pandemic and an expanding user base, the global gaming industry is expected to reach $665.77 Bn in the next five years, with India accounting for $8.92 Bn.”

“This industry shows strong growth potential, leading to a rise in early-stage startups. Indian gaming companies have raised $2.8 Bn in the last five years, highlighting significant growth potential,” he added.

Given the rise in gaming companies, the report underlined regular audits of companies operating within the gaming industry to ensure compliance with ethical standards and best practices, and it would explore various facets of a company’s practices, identifying areas for improvement and ensuring transparency and accountability. 

The study mentions identity and age verification, coupled with robust know your customer (KYC) protocols, are the bedrock of online gaming platforms, especially those dealing with real money transactions.

It further pointed out that it is crucial for complying with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. In case, this is compromised in online RMG, identity theft, hazards of minors engaging in RMG platforms, financial and legal implications are some of the risks and consequences it could lead to.

Earlier this year, Lumikai’s founder Saloni Sehgal told Inc42 that the Indian market share for games, anime, VFX and the like is about $12 Bn. With the segment growing at a CAGR of 20%, it is expected to hit $30 Bn in the next five to seven years.

Also, listed gaming giant Nazara Technologies picked up 8.5% stake in Web3 gaming platform Circle of Games (COG) for $500K (about INR 4.17 Cr).

On the other hand, Facebook parent Meta eyes its next big opportunity in India’s gaming, expecting the space to be worth almost $7.5 Bn and generate 250,000 jobs by 2025, said India MD Sandhya Devanathan in March.