The government is reportedly investigating streaming giant Netflix for alleged visa violations and tax evasions. It has also come to light that a former director in its legal department had sued it in the US. Anvitii Rai looks at the controversies dogging the company in India.
What is the government’s probe all about?
LAST WEEK, A Reuters report said the government is investigating the business practices of US streaming giant Netflix’s India operations, including allegations of visa violations and racial discrimination. The details of the investigation were included in a July 20 email written by a home ministry official to Netflix’s former director of business and legal affairs for India, Nandini Mehta, who left the company in 2020. Mehta, in turn, has said she has been pursuing a lawsuit in the US against Netflix since 2021 for alleged wrongful termination as well as racial and gender discrimination and welcomed the investigation and hoped the authorities make their findings public. Netflix has in US courts denied Mehta’s allegations and said she had been fired for repeatedly using her corporate credit card for tens of thousands of dollars in personal expenses.While the report did not specify which agencies are involved in the probe, it is understood that the Foreigners Regional Registration Office, and the Intelligence Bureau, are looking into the matter.
Facing backlash over its content
LAST MONTH, THE US streaming giant again faced heat in India over its content deemed insensitive by some users. Finally, it was forced to add new disclaimers to IC-814: The Kandahar Hijack, its Indian web series about the 1999 plane hijack, after social media outrage and government anger over what they said was Muslim hijackers being shown as Hindus—the disclaimer was added to specify that while the hijackers used “Bhola” and “Shankar” as code names, they were not Hindus. Another controversy that was noticeable was over Tamil superstar Nayanthara’s film Annapoorani: The Goddess of Food, where the actress’ character had a Muslim love interest. Hindu groups thus accused the movie of promoting love jihad, and it had to be taken down.
Tax evasion allegations
ACCORDING TO THE complaint filed by Mehta in the US, Netflix’s tax department created a memorandum which was “meant to create a “facade” whereby Netflix wasn’t “permanently established” in India so as to avoid local tax liability”, as reported by The Hollywood Reporter. The report further states that Mehta was expected to follow certain protocol and “blur the lines between Netflix US and Netflix India.”
Since 2023, Netflix has been facing a `196-crore tax demand from the Income Tax (I-T) department, stemming from alleged tax evasion practices. The Dispute Resolution Panel (DRP) had ruled in favour of the I-T department, validating the tax demand raised by its international taxation wing. The I-T department had asserted that Netflix Entertainment Services (India) LLP functioned as a dependent agent permanent establishment (DAPE) of Netflix. Between April 2020 and December 2020, the company had earned `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
WHILE MOVIES AND TV content are regulated by separate Acts, there’s no such specific law for OTT content. The government has supported a self-regulatory mechanism with it stepping in only as a last resort. Thus, in 2021, the Internet and Mobile Association of India (IAMAI) announced the formation of the Digital Publishers Content Grievances Council (DPCGC), which is a level II self-regulatory body for online curated content (OCC) platforms. This body has a OCC publisher council, with representatives from the platforms and a grievance redressal board (GRB). The latter is headed by a retired high court/Supreme Court justice and comprises six members, who are prominent figures in the industry as well as experts from various fields such as child 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 makers, and since 2018, it has produced 140 such movies and series. Of these, 26 were launched in 2023, and of these, all the movies from India featured in the global top 10 for non-English films, while this number remained at 60% for scripted series. Additionally, in 2023, Netflix recorded a revenue growth of 25%. 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 percentage terms in India in the quarter. However, going forward, it may see a challenger in the Reliance-Disney merger, which is set to create the country’s largest media firm.