Netflix Under I-T Scanner, May Be Taxed For Its Income In India: Report

Seems like Netlfix is under the radar of the Income Tax department as India seeking to tax the streaming giant's income earned from services in the country.

The streaming services giant has some infrastructure and employees from the parent entity on secondment in the country to support Netflix. ( Image Source :Getty )

Seems like Netlfix is under the radar of the Income Tax department as India seeking to tax the streaming giant's income earned from services in the country, news agency Reuters reported on Friday quoting Economic Times. In a draft order, the tax authorities attributed an income of about Rs 550 million or $6.73 million to Netflix's Indian permanent establishment (PE) in the assessment year 2021-22, the report added. 

If Netflix is taxed in India, it would be the first-ever instance where the government would tax an overseas digital firm for providing electronic commerce services in the country, the report added.

According to the authorities, the streaming services giant has some infrastructure and employees from the parent entity on secondment in the country to support Netflix which also leads to a permanent establishment and tax liability for the company.

To recall, last month, Netflix started revising its subscription rate across 116 counties following similar price cuts in India that helped the company grow user engagement and accelerate its revenue.

The company, in its first-quarter earnings for 2023 said that in India low priced subscriptions saw a 30 per cent growth in customer engagement and 24 per cent revenue growth year-on-year. In 2021, Netflix reduced subscription prices in the range of 20-60 per cent to suit the Indian market and deepen its penetration.

This comes as the OTT player looks to attract new customers, especially in international markets such as India. The company witnessed a slowdown in the growth of its paid member base after a pandemic-driven subscriber bump.

Netflix's Q1 report showed that its global net income dipped by about 18 per cent to $1,305 million from $1,597 million in the same period last year. However, the revenue grew 3.7 per cent to $8,162 million during the quarter from $7,868 million in Q1 of 2022.

Globally, Netflix's paid membership grew 4.9 per cent to 232.5 million year-on-year. The company also forecast its net income to decline by about 1.6 per cent to $1,283 million in the second quarter of this year while revenue to increase by 3.4 per cent to $8,242 million.