Online Gaming GST Impact Continues: After MPL, Hike Lays Off 55 Employees As Quizy Shuts Down

"Business is in the best shape ever but this 400 per cent increase in GST is a bazooka pointed at us," Hike CEO Kavin Bharti Mittal said.

The heightened tax burden threatens to force many micro, small, and medium enterprises (MSMEs) and startups out of business.

Source : Getty

Hike, the brainchild of Kavin Bharti Mittal and owner of Rush Gaming Universe, has taken the tough decision to release approximately 55 employees, constituting more than 20 per cent of its workforce, as a direct response to the heightened GST (Goods and Services Tax) rates affecting the online gaming industry. A prominent company official confirmed this development on Thursday, reported PTI.

This action follows closely on the heels of Mobile Premier League (MPL), a prominent player in the gaming sector, slashing its Indian workforce by nearly half—approximately 350 individuals—owing to the intensified GST rate, now standing at 28 per cent.

Among the affected at Hike, 55 personnel have been affected, including 24 non-full-time workers. This downsizing amounts to around 22 per cent of the workforce. Despite boasting a robust business status, the unexpected fourfold increase in GST has posed a significant challenge for the company.

Kavin Bharti Mittal, the Founder and CEO of Hike, told PTI, "Business is in the best shape ever but this 400 per cent increase in GST is a bazooka pointed at us. We'll need to absorb some of it and as a result the reduction in workforce at Hike/Rush."

The complete team at Hike has been engrossed in crafting the "Rush Gaming Universe," a pioneering Web 3 gaming platform. Notable investors backing Hike include Tencent, Foxconn, Bharti Group, Tribe Capital, Polygon, Flipkart's co-founder Binny Bansal, seasoned entrepreneur Bhavin Turakhia, and Cred Founder Kunal Shah. With a focus on numbers, the gaming platform reports an impressive 5.2 million active users per month and an annual distribution of over USD 308 million to victorious players.

A few smaller-scale gaming startups, such as Quizy, have already announced their cessation of operations. "Recent developments in the tax landscape and regulatory environment have left us with no choice but to bid farewell to our beloved gaming venture," said Quizy co-founder Sachin Yadav.

Here's the full text from his LinkedIn post:

How Are We Forced to Bid Farewell to Our Beloved Real Money Gaming Industry? 💔🎮

Over the past 3 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.

The online gaming industry in India has been witnessing a phenomenal growth trajectory, and we were exhilarated to be a part of this thrilling journey. Quizy was built to offer games of skill providing players not just entertainment, but also an opportunity to showcase their abilities and compete in a fair & transparent manner.

Sadly, recent GST changes have thrown significant challenges our way. The removal of the TDS exemption limit & the adding flat 30% TDS on all winnings, regardless of the amount, hit us hard. This sudden change substantially impacted player earnings and motivation, leading to a decline in user engagement & loyalty.

The introduction of a 28% GST rate on entry fees further compounded our woes and murdered the industry finally. We had always strived to strike a balance between generating revenue for the government and providing an enjoyable experience for our players. However, an abrupt increase in the GST rate would have placed an undue tax burden on the gaming industry, affecting not just our profitability but also the overall gaming ecosystem.

As an entrepreneur, it has been heart-wrenching to see the dream we built with so much dedication and determination now facing an uncertain future. Our team has invested countless hours, sleepless nights into nurturing this platform, hoping to contribute to India's vibrant gaming landscape.

While we bid farewell to our current endeavour, our love for gaming remains undiminished. As entrepreneurs, we are no strangers to adversity, and we are already contemplating new avenues where we can channel our creativity and passion.

In closing, I urge policymakers and industry stakeholders to engage in meaningful dialogue and collaboration to strike a balance that supports innovation, economic growth, and responsible gaming. The gaming industry holds vast potential to be a catalyst for positive change and employment opportunities, and it deserves a nurturing environment that allows it to flourish.

Thank you to everyone who has been a part of our journey. Special Thanks to our amazing investors for believing in our dream. 

Your unwavering support, both in terms of capital and invaluable resources, has been the backbone of our growth. We couldn’t have come this far without you, and for that, we are eternally grateful.

The All India Gaming Federation (AIGF), a representative body for the industry, voiced concerns earlier this week. It highlighted the substantial 400 per cent upsurge in GST liability, emphasising that numerous entrepreneurial innovators in the sector will bear a disproportionate impact. This heightened tax burden threatens to force many micro, small, and medium enterprises (MSMEs) and startups out of business.