"The company will proactively take steps to mitigate any potential impact to this segment of our business, and we anticipate minimal impact to our overall revenues," it said in an exchange filing. "The company remains committed to its growth agenda and will continue to pursue organic and inorganic opportunities across various segments in which it operates," it said.

Industry stakeholders have termed it "unconstitutional and irrational". The decision could potentially impact jobs and investments in the segment, companies said.

Bhavin Pandya, co-founder and co-chief executive officer of Games 24x7, said the move would "effectively drive consumers towards offshore and illegal platforms that pay no taxes, resulting in a loss of taxes and outflow of foreign exchange".

"This development indicates an increase from 1.8 rupees per 100 rupees spent on a game to 28 rupees on per 100. This will not only discourage players from playing, the professionals for whom its a livelihood will be burdened by taxation. It may also force them to play on offshore platforms, and the whole vision of creating a digital progressing gaming ecosystem seems blurry at this point," said Shivani Jha, Tech Policy Lawyer and Director of EPWA (E-Gamers and Players Welfare Association).

According to a joint report by the Federation of Indian Chambers of Commerce & Industry and EY, online gaming companies clocked a revenue of Rs 13,500 crore in 2022. The report estimated the segment to report revenue of Rs 16,700 crore in 2023 and Rs 23,100 crore in 2025, gross of taxes.