India’s top court rules Tiger Global’s $1.6 bn Flipkart stake sale taxable – Firstpost

In a landmark ruling with wide implications for foreign investors, the Supreme Court of India has held that Tiger Global’s $1.6 billion stake sale in e-commerce major Flipkart to Walmart in 2018 is liable to capital gains tax in India, delivering a major success to the government in its long-running battle against treaty shopping.

The case centred on whether the US-based investment firm could avoid paying taxes in India by routing its investment through Mauritius under the India–Mauritius Double Taxation Avoidance Agreement (DTAA). Tiger Global had claimed that the treaty allowed it to enjoy tax exemption on capital gains earned from the Flipkart exit.

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The tax department challenged the structure, arguing that the Mauritius entity was only a shell created to take advantage of the treaty and that the real economic control, management and profit-making activity were linked to India.

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The verdict is likely to have a direct impact on private equity funds, venture capital investors and multinational corporations that invest in Indian companies through offshore holding entities.

Market participants mentioned the ruling could lead to higher compliance costs and a review of existing investment structures, but it also brings clarity and predictability to India’s tax regime.

In 2018, Walmart acquired a majority stake in Flipkart in one of India’s largest e-commerce deals. Tiger Global, one of Flipkart’s earliest investors, exited a large part of its holding through this transaction, earning capital gains of about $1.6 billion.
The tax dispute began when Indian authorities questioned the Mauritius-based structure used by Tiger Global to claim exemption under the tax treaty.

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The Supreme Court scrapped the Delhi High Court’s earlier relief and backed the tax department, ruling that the investment structure used in the Flipkart exit was primarily designed to exploit the India–Mauritius tax treaty. The court held that the arrangement lacked genuine commercial substance and was meant to avoid tax, and therefore denied treaty protection, declaring the capital gains from the transaction fully taxable in India.

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While experts believe the ruling strengthens India’s ability to tax offshore transactions linked to Indian assets and will influence how future cross-border mergers, acquisitions and exits are structured.

While the government sees it as a major step in protecting tax revenues, investors are expected to push for clearer guidelines to ensure smooth capital flows into the country.

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