The 'State of India Gaming' report, released Thursday and the result of a collaboration between Lumikai and Google, highlights concerns that the increased tax, along with changes in tax deducted at source (TDS), will impact gaming frequency. Lumikai is a gaming & interactive entertainment venture fund.

In September, the finance ministry's revenue department revised the tax rate on online gaming, marking a significant increase from the previous 18%. This decision followed the 51st GST Council meeting's recommendation. 

The report indicates that tax demands now surpass the sector's revenues, with tax notices from FY18-23 totaling $8.9 billion against the industry's revenue of $4 billion. The government has also drawn distinctions in legislation and taxation between cash-based and non-cash based gaming outcomes.

Meanwhile, funding in India's gaming sector saw a 75% decline year-on-year in 2023, reflecting a global drop of 79%. Investments had peaked at $1.744 billion in 2021 but dwindled to $567 million in 2022.

Despite setbacks, the gaming sector's growth remains evident. India recorded approximately 15.4 billion game downloads in FY23, emphasizing its stature as one of the world's primary gaming markets. The country boasts over 568 million gamers, encompassing more than half of its internet users. Paid users have risen by 17% year-on-year, reaching 140 million.

Demographic insights reveal that half of India's gamers fall in the 18-30 age bracket, with a gender distribution of 60% male to 40% female. Notably, there's been a 66% surge in gamers from non-metropolitan areas in FY23, up from 57% last year. The majority, about 62%, prefer UPI as their go-to payment method for games.