GST on real-gaming effect: Mobile Premier League to layoff 350 employees

Days after the governing council on GST (Goods and Services Tax) decided to impose a 28 per cent levy on full deposit value on platform fees for gaming companies, e-sports and skill gaming unicorn Mobile Premier League (MPL) has announced a layoff set to affect 50 per cent of its workforce or 350 employees.

Reports emerging on Tuesday evening suggested that the new rules were set to increase MPL’s tax burden by as much as 350 per cent-400 per cent. News website Moneycontrol reported that MPL co-founders Sai Srinivas and Shubh Malhotra had broken the news to employees in an email.

It quoted the email to say, “The new rules will increase our tax burden by as much as 350 percent-400 per cent. As a business, one can prepare for a 50 per cent or even a 100 per cent increase, but adjusting to a sudden increase of magnitude means we need to make some very tough decisions.”

This is the Bengaluru-based start-up's second round of layoffs in approximately a year. It has laid off over 100 employees and would leave the Indonesian market in May 2022. MPL was previously valued at $2.3 billion after raising an estimated $150 million in September of last year, marking its admission into the unicorn club.

According to industry sources, the action was a direct result of the GST Council's proposal to collect a significant 28 per cent tax on the total deposit amount, without distinguishing between skill and chance games. Currently, gaming platforms pay an 18 per cent GST on platform fees alone.

In response to the heightened GST rates, gaming enterprises are exploring strategies, including potential reductions in variable expenses. These encompass manpower expenditures, along with server and office infrastructure costs. Many companies have already initiated audits to reassess the outlays related to server and office infrastructure.