Government may impose tax on Netflix for the gains in India

The Government of India is mulling to impose tax on Netflix for the profits it has gained from streaming services in the country, as per media report. This may be the first step in taxing the digital companies based out of India that provide electronic commerce services to consumers in the country.

The report reveals that the income tax authorities pointed out that the US-based Netflix has a permanent establishment (PE) in India and is required to have its income assessed for tax in the country. The streaming company has infrastructure and employees from its parent entity on secondment in India to support its streaming services, which would count as PE and make the company liable to pay tax in India.   

The report also said that the authorities drafted an order which attributes about Rs 55 crore income to Netflix’s Indian PE in the assessment year 2021-22. In 2016, Netflix started its services in India and has more than six million subscribers in the country. The country presents a lucrative market for streaming services, with Netflix India reporting a 30% growth in total viewing hours year-on-year in FY21-22. The company’s revenue also rose 25%, the report says.

India’s move to tax overseas digital companies providing electronic commerce services is a significant step towards revenue collection and may result in similar actions taken against other foreign companies operating in India.