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Real money gaming firms are dealing with layoffs, shutdowns and funding troubles after the move to impose 28 per cent goods and services tax on online gaming at full face value.
Unicorn gaming company unicorn Mobile Premier League (MPL) has laid off 350 employees, citing the additional tax burden.
Sai Srinivas, cofounder and chief executive of MPL, which is backed by the likes of Peak XV Partners wrote to its employees that while the company clocked its best business performance in the months of June and July, the impact from GST meant that it had to cut down on costs in order to survive. This included reducing its workforce, also its server and office infrastructure expenses.
Another gaming firm Rush Gaming Universe also has sacked 55 staffers, representing almost a fourth of its workforce.
Sachin Yadav, cofounder of early stage real money gaming startup Quizy, announced the shutting down of his venture
“Over the past three crucial years of our life, I and Amit Kumar poured our hearts and souls into building Quizy that captured the excitement & pretty good scale of over a million users. We were driven by a shared vision of creating an innovative gaming platform and turning it into a profitable venture. However, pained to say this, recent developments in the tax landscape & regulatory environment have left us with no choice but to bid farewell to our beloved gaming venture,” he said in his LinkedIn post.
GST Council on July 11 decided to impose 28 per cent tax on the full face value. In another meeting on August 2, the constitutional body clarified that the tax will be applicable on the deposits made by players to participate in a game, thus avoiding repetitive tax when they use their winning money to play more games.
Anirudh A Damani, Managing Partner – Artha Venture Fund said that the high taxation will have some immediate effect but the industry will adapt.
“High taxation, like the 28 per cent GST on gaming, might seem like a deterrent at first glance. Yet, global comparisons — from the stringent regulations in Singapore to those in Australia and the UK — show that industries often navigate and adapt to such challenges. Particularly in ‘vice sectors’ like gaming, tobacco, and alcohol, the consumer demand has a resilient streak. While the immediate aftermath might introduce turbulence, I foresee the industry demonstrating its adaptability. Innovative strategies and new business models could emerge, turning these challenges into catalysts for growth,” he said.
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