MPL to lay off 50% of its workforce amid taxation decision

Bengaluru-based online gaming and fantasy sports unicorn Mobile Premier League (MPL) has decided to cut 350 jobs a week after New Delhi upheld the decision to implement a 28% tax on online real-money games. It intimated as much to its employees in an internal memo, seen by DH, on Tuesday.

This represents about 50% of its workforce, people familiar with the matter told DH.

“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,” Sai Srinivas, founder and chief executive of MPL wrote to employees via an email. 

"We have already initiated work on revisiting our server and office infrastructure costs, the email added. 

India’s Goods and Services Tax Council, which comprises top federal and state finance ministers, announced the levy of a 28% indirect tax on online gaming, casinos and horse racing last month which invited negative reactions from industry stakeholders including industry body All India Gaming Federation, scores of top investors including Tiger Global, DST Global, Peak XV, Steadview Capital and Kotak Private Equity and an array of online gaming players. However, on August 2, the GST Council in a special meeting decided to stick with the levy, which come into force from October 1.

"The new rules will increase our tax burden by as much as 350-400%. As a business, one can prepare for a 50% or even a 100% increase, but adjusting to a sudden increase of this magnitude means we need to make some very tough decisions," the MPL CEO’s email stated. 

This is the second round of layoffs at the Bengaluru -based startup in about a year. Earlier in May 2022, the company had let go of more than 100 people. 

DH had earlier reported that investors and industry bodies had pointed out companies at their early growth stages, particularly those within the startup and the MSME sector will be disproportionately impacted.

"We believe the decision by the GST Council of valuation on deposits will severely impact the online gaming sector and result in a situation where a majority of players, including the MSMEs will no longer be able to survive in the face of the increased tax liability of 400%," an All India Gaming Federation spokesperson said.