mpl

MPL Suspends 350 Jobs as GST on Real-Money Gaming Rises to 28%

Unicorns in Esports and skill games According to those familiar with the situation, the Mobile Premier League (MPL) is firing off 350 employees, accounting for almost half of its India staff.

This policy follows the GST Council's recommendation to levy a staggering 28% tax on the entire deposit value, with no distinction made between skill and chance games. Gaming platforms are now subject to an 18% GST on platform fees.

"The new rules will increase our tax burden by up to 350-400%. " "As a business, we can plan for a 50% or even 100% increase, but adjusting to a sudden increase of magnitude requires us to make some very difficult decisions," MPL co-founders Sai Srinivas and Shubh Malhotra stated in an email to staff, a copy of which Moneycontrol obtained.

According to the email, the co-founders' variable costs are mostly personnel, server, and office infrastructure. According to the corporation, they have already begun work on revising their server and office infrastructure expenditures. "Regardless, we will still need to reduce our people-related costs," the email stated.

"This is the most difficult decision we've ever had to make." "It's as if we aced our class and now have to repeat a school year," the co-founders said in an email.

"We've spent a lot of time weighing and reweighing this decision, debating whether we should wait or not." We eventually reached this decision because we feel that in uncertain times, the sooner we can provide clarity to everyone, the better."

This is the company's second wave of layoffs in less than a year. It has laid off over 100 employees and will leave the Indonesian market in May 2022.

MPL, founded in 2018 by Sai Srinivas and Shubh Malhotra, offers over 60 games on its Android and iOS applications, including daily fantasy sports, quizzes, board games, puzzles, and casual games. It also boasts more than 90 million registered users in Asia, Europe, and North America.

After financing an estimated US$150 million in September of last year, MPL's worth increased to US$2.3 billion, gaining its entry into the unicorn club.

Its backers include Peak XV (formerly Sequoia India), SIG, RTP Global, Go-Ventures (now Argor Capital), Moore Strategic Ventures, Play Ventures, Base Partners, Telstra Ventures, and Founders Circle Capital.

Real-money gambling incurs a 28% tax.

Last month, about 130 real-money gaming company founders, CEOs, and industry groups wrote an open letter to the government demanding that the GST Council rethink its July plan to slap a 28% tax on the real-money gaming sector. MPL was one of the letter's signatories.

Peak XV and RTP Global, MPL's investors, both wrote to Prime Minister Narendra Modi separately on July 21 to express their fear that the GST Council's plan might result in a "potential write-off" of the US$2.5 billion capital invested in the industry.

According to the investors, the present GST plan would create the "most onerous tax regime for the gaming sector" in the world.

The GST Council, on the other hand, agreed on August 2 to stick to its earlier plan of levying 28% on the entire face value. It did, however, give some respite by suggesting GST on deposits rather than on each wager placed to minimize recurring taxes.

Sachin Yadav, co-founder of the real-money gaming startup Quizy, recently took to LinkedIn to inform that the company was closing down, citing "significant challenges our way" as the reason.

"The vast majority of the most impacted companies are models that grew only after 2021 and are startups, and MSMEs leaving them to risk, of heavy losses and extinction," said Saumya Singh Rathore, co-founder of WinZO games.

"...we are looking at a threat to the much-admired sunshine sector, as well as a threat to innovation, which has created a category that now accounts for 60% of India's online gaming market - the casual gaming sub-sector," Rathore added.