MPL could reportedly lay off half of its workforce as its tax burden multiplies.
Indian gaming application Mobile Premier League, or MPL, is laying off 350 employees, media outlet Reuters reported on Tuesday. The job cut comes on the heels of the government’s recent decision to impose a 28% tax on gaming companies and is a measure by the company to “survive” it, the report citing an internal memo added.
The company’s chief executive officer Sai Srinivas said in the memo that the new regulation will increase the tax burden on MPL by 350%-400% and that the gaming platform is revisiting its expenses related to server and office infrastructure. The CEO stated that adjusting to a sudden increase of that magnitude necessitated the need to make some “very tough” decisions and steps had to be taken to bring down those expenses in order to ensure survival and maintain the viability of the business.
Founded in 2018 by Sai Srinivas Kiran and Shubham Malhotra, MPL has become India’s largest eSports and mobile gaming platform, boasting more than nine crore users who engage in real money games such as Rummy, Chess, etc. The Bengaluru-headquartered company offers a wide variety of games across different categories, including fantasy sports, card games, arcade games, puzzle games, action games, and more. Users can download these games for free and play against real players to win cash prizes.
In its cost-cutting measures, MPL could lay off half of its workforce, the report citing unnamed sources noted. The company’s product team would be the most impacted with over 60 layoffs, it added.
Meanwhile, in July, the Indian government decided to levy a 28% tax on the full-face value of bets placed on online gaming, casinos, and horse racing. However, in the GST Council on August 2, the government decided to impose a tax on the online gaming companies on the total funds deposited and not each bet, according to another Reuters report. Finance Minister Nirmala Sitharaman is eyeing implementing the decision from October 1.
For the government, the move is intended to align the tax rate more closely with other sectors and to generate additional revenue. But for the gaming companies, the decision could have significant repercussions as it puts an additional tax burden on them. According to reports, the federal government expects to earn an extra Rs 20,000 crore annually from levying a 28% tax on online gaming platforms, a significant increase from the previous revenue of Rs 1,700 crore collected from the industry.
Several gaming companies and venture capitalists have written to the Indian government asking it to reconsider its decision as the move could affect their cash flows and hinder their ability to invest in new games and business expansion. This tax burden is expected to limit the industry’s growth potential and impact the feasibility of new projects.
