The twists and turns in Netflix’s India story – Brand Wagon News

The government is reportedly investigating streaming giant Netflix for alleged visa violations and tax evasion. It has also come to light that a former director of the legal department has sued the company in the US. Anvitii Rai looks at the controversies dogging the company in India.

What is the government’s investigation about?

LAST WEEK, a Reuters report said the government was investigating US streaming giant Netflix’s business practices in India, including allegations of visa violations and racial discrimination. The details of the investigation were contained in a July 20 email written by a home ministry official to Nandini Mehta, Netflix’s former director of corporate and legal affairs for India, who left the company in 2020. For her part, Mehta has said she has been pursuing a lawsuit against Netflix in the US since 2021 for alleged wrongful termination and racial and gender discrimination and welcomed the investigation and hoped authorities would make their findings public. Netflix has denied Mehta’s allegations in U.S. courts, saying she was fired for repeatedly using her work credit card for tens of thousands of dollars in personal expenses. Although the report did not specify which agencies were involved in the investigation, it is understood that the Regional Registration Bureau for Foreigners and the Intelligence Bureau are investigating the case.

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Facing backlash over its contents

LAST MONTH, the US streaming giant faced renewed criticism in India for content deemed insensitive by some users. Finally, it was forced to add new disclaimers to IC-814: The Kandahar Hijack, the Indian web series about the 1999 plane hijacking, following social media outrage and government anger over what they claimed were Muslim hijackers who were identified as Hindus depicted. added to specify that while the hijackers used “Bhola” and “Shankar” as code names, they were not Hindus. Another controversy that stood out was Tamil superstar Nayanthara’s film Annapoorani: The Goddess of Food, in which the actress’ character had a Muslim love interest. Hindu groups therefore accused the film of promoting love jihad, and the film had to be removed.

Accusations of tax evasion

ACCORDING TO THE complaint filed by Mehta in the US, Netflix’s tax authorities issued a memorandum that was “intended to create a ‘façade’ through which Netflix was not “permanently established” in India to avoid local tax liability,” as reported by The Hollywood Reporter. The report further states that Mehta was expected to follow a certain protocol and “blur the lines between Netflix US and Netflix India.”

Since 2023, Netflix has been facing a $196 million tax demand from the Income Tax (IT) department due to alleged tax evasion practices. The Dispute Resolution Panel (DRP) had ruled in favor of the IT department, thereby validating the tax claim of the international tax department. The I-T department had alleged that Netflix Entertainment Services (India) LLP was functioning as a dependent agent permanent establishment (DAPE) of Netflix. Between April 2020 and December 2020, the company had earned Rs 503 crore from its Indian operations. According to media reports, Netflix had approached the Income Tax Appellate Tribunal against the order.

Regulatory ecosystem for OTT content

ALTHOUGH MOVIES AND TV content are regulated by separate laws, there is no such specific law for OTT content. The government has supported a self-regulation mechanism, intervening only as a last resort. For example, in 2021, the Internet and Mobile Association of India (IAMAI) announced the formation of the Digital Publishers Content Grievances Council (DPGCC), a Level II self-regulatory body for online curated content (OCC) platforms. This body has an OCC publishers council, with representatives of the platforms and a complaints committee (GRB). The latter is led by a retired Supreme Court judge and consists of six members, who are both prominent figures in the sector and experts in various fields, such as children’s rights and media law.

Performance in the Indian OTT market

NETFLIX INDIA Boasts of approximately 10 million viewers in India. To appeal to Indian viewers, Netflix produces original content with Indian content creators, and as of 2018, it has produced 140 such films and series. Of these, 26 were launched in 2023, and of these, all films from India were in the global top 10 for non-English films, while this number remained at 60% for scripted series. Moreover, Netflix achieved 25% revenue growth in 2023. India added the second-highest number of paid net subscribers in the world in the April-June quarter this year, and the streaming giant saw the third-highest revenue growth in India in the quarter. However, in the future, it could see a challenger in the merger between Reliance and Disney, which would create the country’s largest media company.

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