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American entertainment company Netflix rise in prices due to GST

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Last year Netflix had reduced its base price in India to accommodate a 15% service tax and post the implementation of the GST (Goods and Service Tax) Netflix has followed the same methodology as they have reduced the base price again. The implementation of the GST has increased the taxes from 15% to 18%, and Netflix has silently absorbed the taxes, without changing its total prices.

The implementation of the GST has increased the taxes from 15% to 18%, and Netflix has silently absorbed the taxes, without changing its total prices.

For example, the most expensive plan in Netflix was ₹ 696 earlier before the taxes. This has now been reduced to ₹ 678. Similarly, other plans have also been changed.

Hence, the overall revenue per user for Netflix has gone down nearly by 2.5% in India. It is though not clear if this price change is temporary as this might be a strategy to retain the customer base.

In Australia, though the company has been brave enough to pass on the tax increase to it customers. Australia started levying taxes for cross border digital services as well, thus to take this into effect, Netflix hiked its prices by nearly 20%.

In India for that matter, Netflix has rather been very consistent when it comes to prices, neither have they increased the prices, nor there has been any reduction in the prices. The main reason for this could be that the company had only 2-3 lakh subscriptions as of January 2017. Hence hiking prices in a price sensitive economy in nations like India at such an initial stage might not be the right strategy.

Probably they are following the right approach of sitting on the wait and watch mode and absorbing the hike in prices so that they do not lose their existing customers.

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Ashutosh Aggarwal
Ashutosh Aggarwal is a Founder and Editor-In-Chief at The GST Blog. He holds Bachelor Degree in commerce. He is pursuing company secretary course and chartered accountancy course. Before started this blog, He worked as an accounts manager in a reputed MNC. Also, having an experience of teaching for all subjects of commerce for five years in his study point.

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