Days after the GST Council decided to keep the 28% tax on online real-money games, the Mobile Premier League (MPL) laid off 350 employees.
“Last week, it was confirmed that a 28% GST will be levied on the full deposit value rather than on Gross Gaming Revenue. The new rules will increase our tax burden by as much as 350-400%. As a business, we can prepare for a 50% or even 100% increase, but adjusting to a sudden increase of this magnitude means we need to make some very tough decisions,” Sai Srinivas, founder and CEO of MPL, said in an email to the company employees.
“As a digital company, our variable costs predominantly involve people, servers, and office infrastructure. Therefore, we must take steps to bring these expenses down in order to survive and to ensure that the business remains viable,” added Srinivas.
Since the government announced a 28% GST on online real money games, the firing was preventable. Beginning on October 1, the new tax system is anticipated to go into effect. In the previous 15 months, the Bengaluru-based company has made a total of two layoffs.
It announced its exit from the Indonesian market in May 2022 and let go of about 100 employees. When the company was valued at $2.3 billion in September 2021, it became a unicorn.
Srinivas added that since December of last year, the company’s EBITDA has become positive. MPL has not yet submitted its audited financial statement for FY23, but in FY22, the company’s losses increased 202% to Rs. 1,122 crores, compared to a 28.9% increase in revenue to Rs. 497 crores.
Along with several gaming businesses like Nazara Technologies, Baazi Games, and Winzo Games, the government was also urged to reconsider by the All-India Gaming Federation, a trade group, and about 30 investors. The GST Council did not offer these businesses any immediate relief, but it did state that it might review the taxation of online games in six to eight months.
