BENGALURU: Shares of Indian casino operator Delta Corp lost more than a quarter of their value and other online gaming firms slid on Wednesday, after the country's Goods and Services Tax (GST) Council imposed a 28% tax on funds that such companies collect from their customers.

The move is a blow to the $1.5 billion online gaming industry that has attracted foreign investment. Industry representatives have said the taxes would sap their earnings and the extra charges were likely to be passed on to customers.

Unlisted gaming apps like Dream11 and Mobile Premier League (MPL) have attracted big investors. Dream11, valued at $8 billion, is backed by Tiger Global, while Peak XV - previously Sequoia Capital India - has invested in the MPL app.

Casinos will also be impacted, with tax official Vivek Johri on Tuesday saying the new 28% tax "will be applicable to the value of chips a person buys before playing."

Customers will need to continue paying income tax on online gaming or casino winnings separately, in line with existing laws.

Nazara Technologies, which licenses games for some children's brands, sees minimal impact to its overall revenue, saying the new rule will apply to its skill-based real money gaming segment, which contributed 5.2% to consolidated revenue in fiscal year 2023.

Shares of Nazara fell up to 14%, while Onmobile Global dropped 9% before trimming some losses.

Since the taxation will be on the entry value for casinos and upfront fees in mobile gaming on the customer end, the valuation of these players in private markets might crash, said Amit Kumar Gupta, founder of Fintrekk Capital.

Delta Corp did not immediately respond to Reuters' requests for a comment, while Dream11 and MPL declined to comment.

Nazara and Delta have risen 21.6% and 15.9%, respectively, so far this year as of Tuesday's close, while Onmobile has fallen 11.9%. (Reporting by Varun Vyas in Bengaluru; Editing by Savio D'Souza and Sonia Cheema)