The Indian government is taking steps to tax Netflix for its profits generated from streaming services in the country. But this step is more important than it appears to be, as it is a potential move toward taxing overseas digital companies.
According to a report by Economic Times, income tax authorities argue that Netflix, as a US-based entertainment company with a permanent establishment (PE) in India, should have its income assessed and taxed in the country. Netflix has infrastructure and employees from its parent entity in India to support its streaming services, meeting the criteria for a PE and making it liable for paying taxes.
In the assessment year 2021-22, the authorities have reportedly attributed around Rs 55 crore of income to Netflix India’s PE. The streaming giant launched its services in India in 2016 and currently has over six million subscribers in the country. India is an attractive market for streaming services, as Netflix India reported a 30% year-on-year growth in total viewing hours during the last financial year. Additionally, the company’s revenue increased by 25%, highlighting the potential profitability of the Indian market.
This move by India to tax overseas digital companies providing e-commerce services marks a significant step in revenue collection. It may also set a precedent for similar actions against other foreign companies operating in India.
The taxation of these companies could have far-reaching implications for the digital economy and revenue generation in the country. And that is where it gets tricky.
Will it increase the prices of plans in India? Yes, it may. With chances of paying additional taxes, the prices of plans may increase at Netflix India.
According to the International market, Netflix offers fairly decent pricing in India starting from as low as ₹149/month plan. Although nothing is official, let’s wait to see what happens.
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