Industry Talk

Netflix Faces Taxation Challenge in India as Government Targets Overseas Digital Companies

Netflix has been available in the Indian market for many years but couldn’t grow as much as its competitors like Disney+ Hotstar or Amazon Prime Video. Netflix has tried hard to woo customers in India with different strategies. To get a better hold of the market, it slashed plan prices up to 60% – a mobile-only monthly plan now costs 149 rupees ($2). In addition, it has invested over $400m to produce over 50 films – including 30 Hindi-language films – and shows. Netflix has never revealed a specific subscriber base for India, but estimates place the figure at over 6 million.

In a recent update on taxation policy on various streaming platforms, the income tax department is exploring the possibilities of bringing the famous media platform under new guidelines. For Netflix, India is an important market as the country contributed the highest net subscriber additions to its global tally in 2022. This number was driven by the launch of an aggressive pricing plan in December 2021, original Indian content, and licensed movies. However, the Indian government is considering imposing taxes on Netflix’s operation. This is because the company has a permanent establishment (P.E.) in India and is therefore subject to having the income it derives from the nation assessed for tax.

The tax department’s move would be the first-ever by the government to tax overseas digital companies for providing electronic commerce services to India. The action is part of India’s efforts to regulate the digital economy and ensure that foreign companies pay taxes on the revenue they earn in the country. The Indian government has been discussing introducing a digital tax for some time now. This action against Netflix could be a test case for future taxation of other foreign digital companies.

It would be a difficult choice for the consumer if the company increased the prices of the memberships. Consumers in India are very competitive in terms of pricing and might shift to other OTT platforms. Recently, many users switched to JioCinemas from Disney+ Hotstar, as JioCinema provides at least one year of free subscriptions and IPL matches. Hotstar charges a starting price of Rs299 per month for watching IPL. In just three months, the streaming giant has lost over 4 million subscribers, and since October 2022, it has lost over 8.4 million followers, primarily due to the rise of JioCinema. Therefore, there are chances of a similar consumer shift from Netflix too.

The Government of India’s taxation policy could favor Indian streaming platforms in the long run, as Netflix would have to increase the prices if the taxation policy were implemented on them in the future. Therefore, there is a high possibility that this would shift users from foreign media platforms to Indian streaming platforms, expanding the user base and earnings. However, the popularity of Netflix is much higher among the people in India. Therefore, this would be an excellent opportunity for Indian streaming platforms to increase their popularity among Indian users by giving more value-driven content.

Share

Recent Posts

Katchatheevu to Coco Islands, The Story of India’s Giveaways

The Katchatheevu island issue is back in the limelight after PM Modi mentioned it in…

2 months ago

Bengaluru’s Worsening Water Crisis Should be the Wake-Up Call for India and The World

Bengaluru is facing an acute shortage of 500 million litres of water every day, which…

2 months ago

The Aam Admi Party Conundrum: Will Kejriwal Run The Delhi Government From Prison?

Delhi's Chief Minister, Arvind Kejriwal, has been arrested by the Enforcement Directorate (ED) and will…

2 months ago

Planning to vote for Modi This Year? Wait! Give it a Read to Become an Informed Voter First

The Indian growth story has been famously dubbed the 'Amrit Kaal' by leaders and ministers…

2 months ago

Key Takeaways From Kovind Panel’s Report on One Nation One Election

The report highlights a two-step process in conducting nationwide simultaneous elections that needs many constitutional…

2 months ago

KWG Game: A Color Prediction Paradise for Indian Gamers

KWG Game has quickly become a hotspot for color prediction enthusiasts in India, offering a…

2 months ago