Netflix’s recent win at the Income Tax Appellate Tribunal is being celebrated across the entertainment industry, and understandably so. A verdict that protects Netflix India’s Limited-Risk Distributor (LRD) model also protects similar operating structures used by nearly every global OTT platform.
But once you read past the legal victory lap, a bigger, uncomfortable question appears: Is India’s tax system still equipped to regulate how modern entertainment companies actually work?
For years, tax authorities have taken a traditional view, if a company operates extensively in India, it must be treated like a full-fledged business taking full entrepreneurial risks. But OTT platforms don’t work like TV broadcasters of the past. The IP sits abroad. The creative decisions sit abroad. The risk sits abroad. India is often just a distribution engine.
Netflix argued exactly this, that its India unit is only responsible for marketing and distribution, and therefore should be taxed at a limited, stable margin. The tribunal agreed.
Legally correct. Structurally revealing.
The problem is not Netflix’s model, it’s the fact that India’s tax framework still treats digital operations as if they were traditional production houses. In a streaming world where value is created across borders, where content rights float globally, and where operational complexity sits in the cloud, old tax definitions simply don’t hold up.
This verdict now gives cover to hundreds of global entertainment companies operating in India under similar LRD structures. Unless India modernises its transfer-pricing rules to reflect the realities of OTT and digital media, it risks losing substantial tax revenue, not because companies are evasive, but because the system isn’t designed for how the industry actually functions.
Netflix won the case. But the verdict shows how much India still needs to update before it can truly tax the entertainment economy of the future.
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