The recent GST Council decision to tax gaming companies at a rate of 28 percent might have a ripple effect on the regulatory tech and fintech ecosystems as a whole.

According to industry estimates, gaming applications that use fintechs to handle payouts for players and regtech firms to conduct KYC (know your customer) of their customers may account for about five percent of the total volumes for the regulatory compliance and fintech industries.

According to industry insiders, the increased GST is expected to have a 25 percent impact on their gaming income lines.

Increased operational costs for many platforms will be passed on to customers as a result of a 28 percent GST on gaming. While there may not be a complete shift away from this industry, there will undoubtedly be a change in the quantity of money wagered on these platforms, according to analysts.

There are a lot of power users for these gaming apps, according to a top executive of a finance company that works with several gaming applications. These users can be compared to high-frequency stock market traders. They often place huge wagers.

Gaming applications first began utilizing fintech services after a user attempted to withdraw their winnings from the app using direct bank transfers. However, as the sector came under close government inspection, they gradually tried to make their procedures more compliant.

Currently, between 50 percent and 70 percent of the apps run checks on each user. This would entail verifying the customer's age and identification and, in some situations, taking their photo.

To effectively govern its affairs, the gaming industry is in the process of forming its own self-regulatory organizations.

It requested that the Centre reconsider its decision to apply a 28 percent GST on the total deposit value on July 14. The sector requested that this tax only be applied to gross revenues in a letter to the Ministry of Electronics and Information Technology (MeitY).

The industry estimates that there are roughly 10 million KYC interactions per year in terms of volume.

These applications often provide a closed prepaid wallet where users can store their money. Any wagers they make are kept there, and any winnings are also placed there.

Now, there is a payment gateway that is utilized to transfer the winnings to the mapped bank accounts if the user wants to withdraw their earnings. The use of these financial services will eventually decrease if these apps' popularity declines.