In the first such move towards a foreign streaming services company, Centre is looking to tax Netflix India's income earned from its services in India, The Economic Times (ET) reported on Friday. The authorities have reportedly held that the company has a permanent establishment (PE) in the country and is thus liable to pay the tax on its income here.
In the draft order, the authorities have attributed Rs 55 crore income to Netflix's Indian PE in 2021-22, the report added.
Earlier too, the authorities held that the presence of short-term employees formed a PE of the foreign companies in India.
Netflix, which started its streaming services in India in 2016, has one of the largest markets in the country. According to a report by EY, India topped the list of the countries that spent the most time on the platform. The subscription revenues for the OTT market in India are expected to touch $3 billion by 2024.
In FY22, Netflix India reported a 30 per cent jump in the total viewing hours as compared to the year earlier. Its revenue during the year rose 25 per cent. In FY21, the company's gross revenue in India was Rs 1,529.36 crore.
Now, Netflix can file an objection before the assessing officer (AO) or the dispute resolution panel (DRP) against the order. The final order will be issued by AO after taking the objections into consideration.
The AO's final order can also be appealed at the commissioner of appeals. It can be appealed by authorities as well as the company.
The DRP can take up to nine months to give its decision, which is binding on the authorities but not on the company.