MPL to lay off 350 employees after 28% GST imposed on online gaming

The new taxation rule increases the tax burden on MPL by as much as 350-400 per cent, Srinivas wrote in the email on Tuesday

India's popular online gaming and fantasy sports startup Mobile Premier League (MPL) is laying off 350 employees, representing about 50 per cent of its India workforce, reported Moneycontrol.

This comes weeks after New Delhi implemented a 28 per cent tax on online real-money games.

MPL's survival plan

The Bengaluru-based startup initially announced its plans to lay off employees last week and sent a formal communication on Tuesday, people familiar with the matter said. 

MPL had earlier declined to comment. However, following the publication of the story confirmed the layoff. 

"As a digital company, our variable costs predominantly involve people, servers and office infrastructure. Therefore, we must take steps to bring these expenses down to survive and ensure that the business remains viable," Sai Srinivas, founder and chief executive of MPL, wrote to employees in an email on Tuesday.

This is the second round of layoffs at the Bengaluru -based startup in about a year. It had let go more than 100 people and exited the Indonesian market in May 2022.

New tax rules for online gaming

The move follows New Delhi's implementation of a new taxation rule for the online gaming industry. India's Goods and Services Tax Council, which comprises top federal and state finance ministers, announced plans to levy a 28 per cent indirect tax on online gaming, casinos and horse racing.

The new taxation rule increases the tax burden on MPL by up to 350-400 per cent, Srinivas wrote in the email on Tuesday.

The All India Gaming Federation, representing players including Mobile Premier League, Gameskraft, Paytm First Games, Zupee, Nazara and Rush, labelled the new taxation rule "unconstitutional, irrational, and egregious."

Several notable investors, including Tiger Global, DST Global, Peak XV, Steadview Capital and Kotak Private Equity, subsequently wrote a letter to Prime Minister Narendra Modi, urging him to reconsider the "onerous tax regime."

The investors' group stated that the decision would lead to a write-off of $2.5 billion and a loss of 1 million direct and indirect jobs. However, the Indian government did not roll back its decision.