Centre to tax Netflix for its operations in India: Reports

India is planning to tax the American streaming company Netflix on the income generated by its operations in the country, reports claimed on Friday. Reports added that the American-based company has a permanent establishment in the country, and this is liable for tax on its income generated here. If this happens, it will be the first of its kind move where an overseas digital company will be taxed for providing electronic commerce services to consumers.

In a draft order, the tax authorities attributed an income of about 550 million rupees ($6.73 million) to Netflix's Indian permanent establishment (PE) in the assessment year 2021-22, the report added.

Besides this, the officials also said that the company has its employees and infrastructure from the parent company's secondment in India to support its streaming services. This leads to a permanent establishment and tax liability in the country.

Netflix did not respond to Reuters' request for comment on the matter.

According to Tofler, gross revenue for Netflix Entertainment Services India at the end of FY21 was Rs 1,529.36 crore. Netflix started its operations in India in 2016 and currently has 6 million subscribers in the country. 

Recently, Netflix announced that they had seen an increase of around 30% in engagement in India after a large price cut on subscription tiers in the first quarter of 2023. Netflix lowered pricing in an additional 116 countries in Q1 after observing its success in India.

During Q1 2023, the firm reported $8.16 billion in revenue, a little less than what the market anticipated. However, the business posted Q1 earnings of $2.88 per share, which were greater than anticipated. Netflix stated, "For Q2 2023, we forecast revenue of $8.2 billion, 3 per cent year." 

Before June 2023, according to Netflix, it plans to push out its choices for compensated password sharing within the current quarter.

With Reuters input.