Popular gaming app Mobile Premier League plans to lay off 350 employees as part of efforts to “survive” a tax imposed by the Indian government on online gaming companies.
Affected areas
The quantum represents about 50 percent of its India workforce.
The product team is said to be the worst hit with more than 60 job cuts.
Rationale
The government had recently decided to impose a 28% tax on funds that online gaming companies collect from customers.
MPL CEO Sai Srinivas said this will increase the company’s tax burden by 350%-400%.
“The new rules will increase our tax burden by as much as 350 percent-400 percent.
As a business, one can prepare for a 50 percent or even a 100 percent increase, but adjusting to a sudden increase of magnitude means we need to make some very tough decisions,” MPL co-founders Sai Srinivas and Shubh Malhotra said in an email to employees.
The co-founders said that their variable costs predominantly involve people, server and office infrastructure.
They have already started work on revisiting their server and office infrastructure costs.
GST Council’s proposal
The GST Council had decided in July to levy 28 percent on funds that online gaming companies collect from customers.
In response, a group of around 130 real-money gaming startup founders (including MPL) , CEOs and industry associations had written an open letter to the government, requesting them to reconsider the decision.
MPL’s investors Peak XV and RTP Global also separately wrote to Prime Minister Narendra Modi on July 21.
They warned that the current GST proposal will set up the “most onerous tax regime for the gaming sector” across the world.
These yielded no results, since the GST Council on August 2 decided to stick to its decision.
However, it did grant partial relief by recommending GST on deposits, instead of on every bet placed, to avoid repeat taxation.
Going forward
MPL co-founders said the company recorded its “best ever month in terms of business performance in June and we beat that in July”.
It stressed that it is committed to provide support to the individuals it laid off.
“To everyone who is leaving us, while nothing can truly be enough, we are committed to providing you the best possible support during this transition. We recognize that these changes will also affect your personal life, and the company is here to offer any assistance you may need during this period. We will also do everything in our capacity to help you find new opportunities”, the co-founders said.
