In an email sent late Tuesday evening to all employees, MPL founders Sai Srinivas and Shubh Malhotra said: "Last month has been extremely challenging and uncertain for all of us. We want to thank each and every one of you for the strength and courage you have shown. Last week, it was confirmed that a 28% GST will be levied on the full deposit value rather than on Gross Gaming Revenue. 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."

MPL declined to comment to Mint's query. But highly placed sources in the company confirmed that layoffs will be effective at every level.

The letter added, "However, despite this, we will still have to reduce our people related costs. Regrettably, we will have to let go of around 350 of you. This has been a heart wrenching process because it impacts a lot of our friends and colleagues. In a short span of four years, we have achieved a lot. MPL India was on track to continue the amazing business performance we have seen since December when we turned EBITDA positive."

In fact, the founders claimed that it recorded its best ever month in terms of business performance in June and beat even that in July.

The Bengaluru-based company is backed by Sequoia Capital, and had raised about $35.5 million funding in 2019, led by Sequoia. In 2022, VCCircle reported that the company had laid off 100 or about 10% of its employees saying that it was no longer going after "growth at all costs" and was changing its strategy to "profitable growth". That year, it also exited the Indonesia market.

India's leading gaming firms include three fantasy sports platforms – DreamSports owned-Dream11, Games24x7 owned My11Circle, and Galactus Funware Technology-owned MPL – and according to the All India Gaming Federation's estimates, the size of the industry is at $2-2.5 billion (about ₹16,000 crore).

Highly placed industry sources, quoting data from the Accounting and Corporate Regulatory Authority (ACRA) of Singapore, said that M-League Private Limited, the Singapore-based parent company of Galactus, spent $92 million or ₹752 crore on advertising and promotional expenses in FY22, which was an 81% increase over FY21. This rise in spend majorly contributed to its losses rising 3X over FY21 to $149 million in FY22.

Last week, the government's GST Council decided not to roll back the 28% GST on the sector. To prevent or pre-empt these companies from moving base offshore, in order to protect their customers from paying the increased GST burden, the Council has recommended that even offshore entities offering such online money gaming to Indian consumers have to register and are liable to pay GST. Gaming companies said this could set the industry back heavily.