Income Tax Department looking to impose Tax on Netflix’s India Operations

India is considering taxing Netflix Inc’s profits from streaming services in the nation.

According to the report, the tax authorities ascribed an income of around Rs. 55 crores ($6.73 million) to Netflix’s Indian permanent establishment (PE) in the assessment year 2021-22 in a draft order.

This is the first time that India would tax foreign digital enterprises that provide customers with electronic commerce services. According to the publication, the tax officials reasoned that the US corporation had certain workers and infrastructure from the parent entity on secondment in India to support its streaming services, resulting in a PE and tax liability. This has resulted in the development of a permanent presence in India, which produces a tax responsibility.

The move is part of India’s efforts to control the digital economy and guarantee that international corporations pay taxes on revenue earned in India. For some years, the Indian government has debated implementing a digital tax, and its move against Netflix might be viewed as a test case for future taxation of other international digital enterprises.

Netflix did not respond to a Reuters’ request for comment.

Netflix Inc exceeded Wall Street profit projections for the first quarter but provided a weaker-than-expected forecast on Tuesday, highlighting the difficulties the mature streaming service has in its quest of growth.

The business said it delayed a larger rollout of a strategy to tighten down on unauthorized password sharing until the second quarter to make changes, postponing some financial gains, but it was satisfied with the outcomes thus far.

Revenue and earnings for the first quarter were broadly in line with Refinitiv’s average analyst projections of $8.162 billion.