#e4mExclusive:  Gaming firms flag GST notices, regulatory uncertainty to MIB

Gaming industry stakeholders have raised concerns over ambiguity in the online gaming regulatory framework, GST notices linked to in-game transactions, the import of game-development kits and access to startup investment at a closed-door meeting with Shruti Singh, Joint Secretary at the Ministry of Information and Broadcasting (MIB), during the India Game Developers Conference (IGDC) in Chennai.

The conference was hosted by the Game Developers Association of India (GDAI). Stakeholders also flagged gaps in industry skilling and the need for better coordination between the MIB and the Ministry of Electronics and Information Technology (MeitY), arguing that developers need greater clarity on the regulatory and administrative requirements governing the sector.

Singh heard the concerns raised by industry representatives and assured them that she would get back to them with solutions to the issues discussed, according to people familiar with the meeting.

Stakeholders also raised concerns over GST notices being issued to gaming companies for in-game app transactions. According to their account of the discussion, the government cited concerns that a parallel economy is operating in the sector. 

The concerns raised at the meeting reflect several challenges identified in GDAI’s GameDev Outlook 2026, which examines the conditions required to turn India’s large gaming audience into a sustainable game-development industry. The report calls for clearer regulatory guidance, coordinated government interfaces, smoother access to finance and more predictable administrative processes.

Regulatory ambiguity and coordination between ministries

A central issue raised by stakeholders was ambiguity surrounding the Promotion and Regulation of Online Gaming (PROG) framework, with developers seeking clarity on how the rules apply to different gaming business models and activities.

The PROG Act, 2025, and the accompanying rules, effective May 1, 2026, establish a framework for online social games and esports while prohibiting online money games and related facilitation. For studios developing games, the practical question is how the requirements apply to particular features, monetisation models, payment flows and distribution arrangements.

GDAI’s report identifies regulatory decision uncertainty as a concern for 34.6% of industry respondents. Nearly half, 49%, cited compliance time and complexity as a challenge, while 11.5% reported game-classification uncertainty. The report’s respondents rated ease of doing business at an average of just four out of 10. These findings are based on 104 industry submissions and should not be interpreted as a census of the entire sector.

The report also highlights the need for clearer coordination between MeitY, which leads online-gaming regulation, and MIB, which advances animation, visual effects, gaming, comics and extended reality (AVGC-XR) development and sectoral support.

It recommends clearer responsibilities, coordinated guidance and designated points of contact so that studios are not redirected between ministries when seeking clarification. It also calls for published examples and an accessible query mechanism to explain how rules apply to in-app purchases, probabilistic mechanics, independent account transactions, rewards and in-game assets.

For developers, the uncertainty can arise before a game reaches the market, when studios must decide how to design a product, structure its transactions and allocate resources to production. GDAI argues that regulatory requirements should be understandable in advance and that changes should be communicated with workable transition arrangements.

GST notices and banking friction

The GST concerns raised at the meeting add a taxation dimension to the wider debate over how different gaming activities and transactions are interpreted by authorities.

Stakeholders said gaming companies were receiving GST notices relating to in-game app transactions, with the government citing concerns about a parallel economy. 

Separately, GDAI’s report identifies difficulties faced by game-development businesses when dealing with banks and payment providers. It recounts stakeholder accounts of premium-game developers encountering reluctance to open business bank accounts or being asked for gaming-related licences and approvals. In one instance, a payment provider associated a business with real-money gaming after seeing the word “gaming” on its website during discussions about a UPI mandate.

Another consultation described a bank manager advising against receiving proposed overseas investment after learning that the studio developed battle-royale and shooter games.

GDAI recommends that banks and payment providers assess a company’s actual activities, revenue model and transaction flows. It calls for clear documentation requirements, staff guidance and a route to specialist review for cases that require further assessment.

The report’s findings concern financial onboarding rather than the GST notices raised at the meeting. Taken together, however, the two issues underline the importance of clarity around the nature of a gaming business and the transactions it undertakes.

Import hurdles and startup investment

The import of game-development kits was another issue raised by stakeholders, alongside investment constraints facing gaming startups. Development hardware and specialised tools can be important for building, testing and optimising games, while delays or uncertainty around access can complicate production planning.

Access to capital is a more widespread concern in GDAI’s survey. Three-fourths of industry respondents identified capital and publishing investment as a barrier, while 76.9% rated the funding ecosystem inadequate or very inadequate.

The report points to a particular challenge for studios creating original intellectual property: they may need to fund a team for a year or longer to produce a playable demo, which in turn may be required to attract investors or publishers. If capital is delayed or runs out before the next funding round, developers can struggle to retain their teams and complete production.

GDAI recommends funding that covers different stages of development, from prototypes to production and commercialisation. It calls for upfront grants, milestone-based payments, proportionate eligibility requirements and predictable disbursements, with smaller and regional studios in mind.

The report also highlights the importance of timely access to overseas investment, citing a stakeholder account in which foreign funds remained unavailable for approximately one and a half months because of administrative issues. It recommends clearer documentation requirements and prompt resolution of discrepancies.

On market access, 51.9% of industry respondents said they faced difficulty attracting international partners. GDAI recommends sustained programmes that help studios prepare projects, make relevant introductions, obtain commercial advice and follow up with potential publishers and investors. It argues that the success of such initiatives should be measured by testing agreements, publishing negotiations and completed deals, rather than event attendance alone.

Skilling gap threatens production ambitions

The concerns around skilling raised at the meeting also find support in the report’s survey. Some 56.7% of industry respondents rated fresh talent poorly or not at all ready for studio requirements.

Game and level design was identified as a priority skill by 71.2% of industry respondents, followed by gameplay programming and systems at 59.6%, technical art and optimisation at 54.8%, and game-engine proficiency at 53.8%.

GDAI recommends stronger links between studios and educational institutions, practical production experience, curriculum reviews and structured internships. The aim is to ensure that graduates are equipped to contribute to commercial game production, rather than requiring studios to bridge the entire gap between academic training and industry workflows.

The report also points to limited direct studio experience among some teaching teams and calls for faculty development and more sustained industry-academia partnerships.

The issue has implications for the government’s wider AVGC-XR push. Investment in training infrastructure, the report argues, needs to be matched by practical learning and closer alignment with the skills studios require to develop and commercialise games.

IP protection and distribution challenges

Beyond regulation, taxation, investment and skilling, the report flags concerns around intellectual-property enforcement and app-store processes. Some 23.1% of respondents reported difficulties with IP enforcement, while 18.3% cited app-store review or removal problems.

GDAI recommends shared contract guidance, better records of asset ownership and accessible dispute support. It also calls for clearer advice on publishing contracts, including ownership, licensing, revenue sharing and post-launch responsibilities.

These issues matter as studios increasingly seek to build original intellectual property rather than remain dependent on outsourced development and co-development assignments. Unclear ownership arrangements or distribution disputes can undermine the commercial value of a game even after a studio has invested heavily in production.

The report also identifies digital and child safety as areas where practical guidance can support player trust. It points to the PROG Rules, 2026, and the Bureau of Indian Standards’ IS 19690:2026 on age ratings and content-descriptor labels as a basis for implementation guidance.

Industry awaits follow-up

The closed-door meeting at IGDC brought together concerns spanning regulatory interpretation, GST, imports, investment and workforce development. Singh’s assurance that she would return with solutions offers a possible next step, although the specific measures and timelines remain to be established.

GDAI’s report provides a broader agenda for addressing the sector’s operating challenges: clearer regulatory guidance, better coordination between ministries, predictable funding, smoother financial processes and closer links between education and production.

India’s video-game market generated an estimated $1.04 billion in revenue in 2025 and served 511 million players, according to the report. GDAI’s central argument is that audience scale alone will not create a globally competitive development industry. Developers also need the regulatory certainty, capital, talent and administrative support to take games from concept to commercial release.

The next test for the industry and government will be whether the concerns raised at the meeting translate into clear procedures and practical solutions for studios operating within the permitted gaming ecosystem.