Real money gaming platform Mobile Premier League (MPL) will lay off 350 employees to “survive” the 28 percent goods and services tax (GST) that will be imposed on online real money gaming companies starting October 1, Reuters reported on August 8.
“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 100% increase, but adjusting to a sudden increase of this magnitude means we need to make some very tough decisions,” MPL CEO Sai Srinivas said in a memo sent to employees, Economic Times reported.
The layoff is expected to reduce the size of the company by half.
The Indian government in July announced a 28 percent GST levy on the total game value for online gaming platforms, at par with the tax levied on gambling. Industry stakeholders immediately criticised this move, claiming that it would destroy the fast-growing online gaming industry. The government later in the month informed that the 28 percent GST would only apply to funds deposited by users and not to the total game value. Notwithstanding this partial relief, industry participants remained unhappy, noting that the tax is still burdensome and could set the Indian online gaming industry back several years.
Why does this matter: MPL’s decision to lay off employees owing to the new GST rate could be the first of many such moves by the online real money gaming industry as they try to cut costs to remain in this competitive industry. The GST Council noted that it will review its decision on the GST levy in 6 months, and multiple such layoffs might influence the Council to roll back its policy or reduce the GST rate.
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