If you want to watch Narcos on Netflix, listen to Beyonce on Apple Music, or download an e-book from the Amazon Kindle global store, be prepared to pay an additional 15 percent from next month. Starting 1 December, a new service tax component will be charged on downloads from foreign content providers.
This might prompt overseas content providers such as Netflix and Apple Music to adjust the pricing of their subscription service. Domestic providers such as Hotstar, Hooq, Saavn, and Gaana will remain unaffected as they already include the service tax component in their subscription packages.
The Central Board of Excise and Customs (CBEC) issued an amendment on 9 November to this effect, through four different notifications, putting in place the Place of Provisions of Services Rule (PPSR) for online information and database access or retrieval services.
Earlier, foreign content providers had to pay taxes only on B2B (business to business) transactions if the subscriber was situated in India. If the content in such instances happened to comprise information database, then the provider was exempt from the tax. The tax was subject to the location of the provider.
From 1 December, the change in rule will affect consumers and the tax will be levied on the basis of the location of the recipient. The change will hit bills of subscription services, web hosting services, downloading of e-books, music, movies, and even online gaming.
Industry experts are saying that the step will level the playing field between domestic providers and foreign entities. The affected service providers now have the option of raising the price of their services or carrying the tax burden themselves.
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