Online gaming platform MPL to lay off 350 employees, blames tax for big step

Mobile Premier League (MPL) says it will will lay off as many as 350 employees as a result of the tax imposed by the government.

Mobile Premier League (MPL) says it will will lay off as many as 350 employees (MINT_PRINT)

Gaming platform Mobile Premier League (MPL) says it will will lay off as many as 350 employees as a result of the tax imposed by the government on online gaming companies. MPL said it was a step taken to "survive", Reuters reported on Tuesday quoting an internal memo.

Notably, the Indian government has slapped a heavy tax that the gaming industry is saying it will not be able to bear. The move by MPL to sack a large chunk of its workforce is now being blamed on the tax. 

Last month, the government decided to impose a 28% tax on funds that online gaming companies collect from their customers for every bet. 

However, at the beginning of August, the government had provided partial relief and said it will levy taxes on online gaming companies on the total funds deposited to play online games and not on every bet.

The tax on bets placed on online games will be implemented from October 1, despite various states demanding a review, including Delhi and Goa.

The new rule will increase the company's tax burden by 350%-400%, MPL CEO Sai Srinivas said in the memo, adding that the company is revisiting expenses related to their server and office infrastructure.

Half the workforce employed by the company could be laid off, Reuters quoted a source as saying.

"Adjusting to a sudden increase of this magnitude means we need to make some very tough decisions ... We must take steps to bring these expenses down in order to survive and to ensure that the business remains viable," Srinivas said.

A gaming start-up Quizy's founder also announced shutting down of their business due to GST rate increase, PTI reported.

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.

The GST Council, led by the Union finance minister and representatives of all states, had discussed the language of amendments that will be needed to enable the tax on online gaming.

The panel meeting in August was to deliberate on the tax law changes that would be required to implement it.

Union FM Nirmala Sitharaman said Delhi finance had minister opposed the levy of the tax on online gaming while Goa and Sikkim wanted the levy on GGR (gross gaming revenue) and not on face value.

Sitharaman, however, said other states ranging from Karnataka to Gujarat, Maharasthra and Uttar Pradesh wanted the decision taken at the last meeting to be implemented.

More than 100 gaming firms said in a letter to the finance ministry that the tax will stifle foreign investment and put $2.5 billion already invested in the sector at risk.

There would be a review of the levy after six months of its implementation, the FM had added.