Rush Gaming Universe, a casual skill gaming platform from Kavin Bharti Mittal's Hike, is laying off around 55 employees, of which 24 are non-full time employees. This makes it the latest casualty of the government's 28 percent GST on the real-money gaming sector.
These cutbacks represent about 22 percent of the company's workforce, Mittal told Moneycontrol.
"Business is in best shape ever. This 400% increase in GST is a bazooka pointed at us. We'll need to absorb some of it," Mittal said.
This follows the recent layoffs of 350 employees by esports and skill gaming unicorn Mobile Premier League (MPL), which represents about 50 percent of its India workforce, Moneycontrol reported on August 8.
On August 2, the GST Council decided to stick to its initial proposal of levying 28 percent on the full face value of real-money games, without distinguishing between games of skill and chance, despite suggestions from a handful of states to review it.
However, the council offered these firms partial relief by recommending that the GST be levied on the total amount of money deposited by users to play real-money games, rather than on each bet, to prevent double taxation. The council also agreed to review the levy six months after implementation.
Industry executives and other stakeholders say the proposed tax rules will increase a company's tax burden by 350 percent-400 percent, thereby severely impacting the growth trajectory of the sector.
WinZO co-founder Saumya Singh Rathore recently said that the fast-growing casual, quick continuous gameplay model will be hit dearly as nearly 70 percent of deposits are withdrawn by the players as winnings.
Due to low margins in this format, 28 percent GST on deposits would be "two times the operating margin, leaving the companies in a bleed/loss-making mode," she said.
"...we are looking at a threat to the much-admired sunshine sector and a threat to innovation that created a category that is now 60 percent of the online gaming market in India - the casual gaming sub-sector," Rathore said.
Sachin Yadav, the co-founder of a real-money based gaming company Quizy also recently took to LinkedIn to announce that they were shutting down the company, stating that the recent GST changes have thrown "significant challenges our way".
In June 2023, Rush Gaming Universe had claimed to have crossed the Rs 2,500 crore mark in annualised gross revenue in two years of its launch. It claimed to have clocked fourfold growth over the past 12 months and was operationally profitable since October 2022. It claims to have 5.2 million monthly active users.
Hike counts Tiger Global, Tencent, Polygon, JumpCrypto, Tribe Capital, Republic, and individuals such as Rajeev Misra, Arjun Sethi, Aditya Agarwal, Elad Gil, and Mark Pincus among its investors.
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