Netflix Isn't Likely To Change Indian Pricing Despite Equalization Levy

Global streaming giant Netflix won’t pass on India’s 2% equalization toll to its customers in the market this year and local tariffs for Indian users are relied upon to remain unchanged. Right now, Netflix’s pricing for India starts at INR 199 every month for the versatile only tier and goes up for INR 799 every month.

Other tech giants, in particular Google, are probably going to pass on the equalization toll to its ad business customers in the US and other nations whose ads are visible in India. The equalization toll may also affect the pricing of other OTT platforms and tech specialist co-ops in India. Google last month said that it will add a surcharge to the invoices shipped off non-Indian customers whose ads are seen in India.

All things considered, given the tight competition with Amazon Prime, Disney+ Hotstar, SonyLIV, Zee5, and other OTT majors in India, Netflix has very little space to maneuver its pricing for the Indian market.

According to an ET report, Netflix didn’t charge users the equalization demand even in last year’s plans and paid it out of its pocket.

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The equalization demand was introduced to tax e-commerce companies that have a presence in India, however, their billing is done in international markets. These companies often will in general escape the nation’s cross-line tax system by billing their customers from offshore units. The duty is meant to bring these non-inhabitant companies which administration Indian customers, under the ambit of tax.

In 2016, India introduced an equalization demand at the rate of 6% on online advertisement administrations. The public authority gathered around INR 1,000 Cr from the duty in 2018-19. The current 2% equalization demand on non-inhabitant eCommerce operators was introduced last year and is paid on the gross consideration amount by the unfamiliar e-commerce operator.

According to the new guidelines, online sale of products or administrations is defined as any purchase that has been made online, online payment, or even an offer that has been accepted online. This means that even businesses whose advertisements are visible within the nation regardless of whether their administrations are not available should pay an equalization demand.

Netflix has added over 8.5 Mn subscribers in the quarter finished December 2020, to take its tally of subscribers to 203 Mn, the company’s quarterly earning update showed. The platform’s paid enrollment has increased by 23% in the final quarter of 2020, compared to the same time frame in 2019. Asia Pacific region which includes India was the second-largest contributor to the subscriber base in 2020 with 9.3 Mn new subscribers

Google’s surcharge will be applicable from October 1, 2021, and will be required from non-Indian customers whose ads are seen in India. Inn bookings, enterprise resource planning software could also go under the domain of the law. Last month, finance minister Nirmala Sitharaman clarified that the equalization demand is forced on internet business operators, and not on the investor.

India has shielded the 2% equalization demand it forces on unfamiliar companies for digital transactions, arguing that the toll is non-discriminatory. In April this year, the US Trade Representatives Body (USTR) launched an investigation into the digital taxes forced by 10 nations including India on US-based companies, after these companies cried foul and alleged that the toll was discriminatory in nature. Responding to the test, India said that the toll was in accordance with the World Trade Organization (WTO) standards and international taxation agreements.

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