Preheat the oven to 400 degrees F (200 degrees C). Spray 9 wells in a cupcake tin with nonstick cooking spray, or line with paper liners (spray the liners with nonstick cooking spray).
Combine flour, sugar, salt, garlic powder, Italian seasoning, and baking powder in a bowl. Whisk to combine and make a well in the center.
Add milk, oil, and egg to the well and whisk them gently together to blend before using a fork or spatula to incorporate the wet ingredients into the dry. Stir mozzarella cheese and pepperoni into the sticky batter. Divide batter amongst the prepared muffin cups.
Bake in the preheated oven until cupcakes are lightly browned and baked through, 13 to 15 minutes. Cool in the pan for 1 to 2 minutes, then move to a cooling rack. Serve warm with pizza sauce for dipping if desired.