New Delhi: The Union government is seeking to tax Netflix for profits that it garnered from streaming services in the country, a move that could be the first step in taxing overseas digital companies that provide electronic commerce services to consumers in the country, according to the Economic Times.

The newspaper reported that income tax authorities have argued that because the US-based entertainment company has a permanent establishment (PE) in India, it is required to have its income assessed for tax in the country. The streaming company has infrastructure and employees from its parent entity on secondment in India to support its streaming services, which would count as PE and make the company liable to pay tax in India.

A draft order issued by the authorities attributes about Rs 55 crore income to Netflix's Indian PE in the assessment year 2021-22, according to ET. Netflix launched its streaming services in India in 2016 and has over six million subscribers in the country. The country presents a lucrative market for streaming services, with Netflix India reporting a 30% growth in total viewing hours year-on-year in FY21-22. The company's revenue also rose 25%, the report says.

India's move to tax overseas digital companies providing electronic commerce services is a significant step towards revenue collection and may result in similar actions taken against other foreign companies operating in India.

The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.