The government is seeking to tax Netflix’s income earned from streaming services in the country, people familiar with the matter said, reported Economic Times.
It’s the first such move to tax overseas digital companies providing electronic commerce services to consumers in India, they said.
The income tax authorities have held that the US-headquartered entertainment company has a permanent establishment (PE) in India and is thus liable to get its income in the country assessed for tax.
In a draft order, the tax authorities attributed about ₹55 crore income to Netflix’s Indian PE in the assessment year 2021-22, they said.
The tax officials have reasoned Netflix had some infrastructure and employees from the parent entity on secondment in India to support its streaming services, leading to a PE and tax liability in the country.
Tax authorities have in multiple instances in the past held that the presence of seconded employees, those loaned for a short period, formed a permanent establishment of the foreign company in India.
Netflix rolled out its streaming services in India in 2016 and currently has over 6 million subscribers in the country.
According to Netflix Entertainment Services India’s financial data, sourced by Tofler, the company ended FY21 with gross revenue of ₹1,529. 36 crore.
Netflix India posted a 30% growth in total viewing hours year-on-year, while revenue rose 25 percent in FY21-22 from a year earlier, Monika Shergill, vice president, content, said in a recent interview.