Mobile Premier League Online sports platform Mobile Premier League (MPL) has laid off around 350 employees or about half of its India team to cut down on expenses and bear the burden of increased GST of 28 per cent, according to an internal company email.
A gaming start-up Quizy's founder also announced shutting down of their business due to GST rate increase. The GST Council has decided to levy a 28 per cent GST on online gaming and casinos on the face value of bets at the entry level.
The Centre will bring amendments to the Central GST law in the ongoing monsoon session of Parliament, following which states will pass the amendments in their respective assemblies to pave the way for the introduction of changes in the law by October 1.
What MPL co-founder said?
MPL Co-Founder Sai Srinivas in an email to employees said that it was confirmed last week that a 28 per cent 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 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 this magnitude means we need to make some very tough decisions," Srinivas said.
He said that as a digital company, our variable costs predominantly involve people, server 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. We have already initiated work on revisiting our server and office infrastructure costs.
"However, despite this, we will still have to reduce our people-related costs. Regrettably, we will have to let go of around 350 of you. This has been a heart-wrenching process because it impacts a lot of our friends and colleagues," Srinivas said.
An email query sent to MPL did not elicit any reply. Quizy Founder Sachin Yadav in a Linkedin post said that "recent developments in the tax landscape and regulatory environment have left us with no choice but to bid farewell to our beloved gaming venture."
Yadav said that the removal of the TDS exemption limit and the provision of flat 30 per cent TDS on all winnings had hit the company very hard. "The introduction of a 28 per cent GST rate on entry fees further compounded our woes and murdered the industry finally," Yadav said.
Industry body All India Gaming Federation (AIGF) said that with over 400 per cent increase in GST liability, a vast majority of entrepreneurs who had innovated in the sector would be disproportionately impacted with many of MSMEs and startups going out of business.
"Since the decision, multiple companies have announced their closure or widespread layoffs and we believe this trend will only increase in the coming months.
Unfortunately, the decision will result in an emergence of an oligopolistic market.
"Only a few established and well-entrenched companies will be able to scrape through this change by using their existing capital reserves, though, even their revenues and valuations will significantly fall," an AIGF spokesperson said.
(With PTI inputs)
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