The Indian government’s decision to levy a new tax on iGaming has triggered waves of shock and fear in the country’s online gaming industry. The BJP-led government of India has plans to impose a hefty 28 per cent tax on the money that online gaming companies earn from their clients. Industry leaders and some critics have warned that the hefty tax could possibly cripple the fast-growing industry.

The Goods & Services Tax Council, which is made up of federal and state finance ministers, recently agreed to levy the indirect tax on iGaming companies, casinos, and even horse racing. The council also made it clear that it wouldn’t distinguish between a “game of chance” and a “game of skill.” In that case, the loophole that allows fantasy sports companies to describe their offerings as skill-based products would automatically vanish.

The announcement drew a sharp response from the online gaming industry. For instance, the All-India Gaming Federation’s Chief Executive Officer (CEO) Roland Landers was quick to denounce the decision by describing it as unconstitutional as well as irrational. He went on to warn that the decision would result in the destruction of the entire Indian iGaming industry. He stressed that the new tax would be beneficial only for illegal offshore online gaming platforms.

Echoing Landers’ warning, gaming app IndiaPlays’ Chief Operating Officer (COO) Aaditya Shah warned that levying the 28 per cent tax would have an adverse on the gaming companies’ cash flow.

E-Gaming Federation’s Secretary Malay Kumar Shukla further said, “A tax burden where taxes exceed revenues will not only make the online gaming industry unviable but also boost black-market operators at the expense of legitimate tax-paying players, further undermining the industry’s image and capacity to survive.”

On the other hand, the government is trying to justify its decision by arguing that online gaming companies have thus far paid little tax on the fees that they charge for providing real money games. Union Finance Minister Nirmala Sitharaman said in a statement that the government has no intention to hurt the online gaming industry.

With nearly 659 million smartphone users, India is in the No. 1 spot in terms of downloading of mobile games. Last year, more than 15 billion games were downloaded in the country, which is more than the U.S. and China combined. Industry experts have predicted that the Asian country’s iGaming market will reach $8.6 billion by the end of 2027.