Tiger Global vs Supreme Court: Will the company pay ₹14,500 Cr tax on Flipkart exit?

Synopsis: The Supreme Court decided whether Tiger Global must pay tax on its $1.7 bn (Rs 14,500 cr) Flipkart exit via the Mauritius route. This Verdict may impact PE/VC, FPIs, and treaty-based investing into India.

Tiger Global is back in the focus, but this time not for a big new investment, but rather for a past move that involved selling its huge 17 percent stake in Flipkart to Walmart in 2018. 

The massive exit was worth $1.7 billion (Rs 14,500 crore). Tiger Global didn’t pay any tax in India on the deal, using the India–Mauritius tax treaty, a loophole global investors have relied on for years. Now, India’s tax authorities are calling that treaty an abuse.

History of the dispute

This whole thing started back in 2018, when Tiger Global sold some Flipkart-related shares in a deal with Walmart. But here’s where it gets interesting: Tiger Global didn’t actually sell Flipkart India shares directly. Instead, they sold shares of Flipkart Singapore, which already owned Flipkart India.

Tiger Global held those Flipkart Singapore shares through companies set up in Mauritius. Now, Mauritius and Singapore also have a tax treaty with India. Those treaties are still used to allow some foreign investors to avoid paying capital gains tax in India under certain conditions.

India’s Income Tax department scrutinized Tiger Global’s deal and raised concerns about its Mauritius structure. They alleged that Tiger Global primarily used the Mauritius entity to avoid taxes, relying on the India–Mauritius tax treaty. The department claimed this Mauritius subsidiary wasn’t a genuine business but rather just a shell for tax benefits.

As a result, the tax office issued a demand to Tiger Global for Rs 14,500 crore (roughly $1.7 billion at present), including interest/penalties, and disregarded the Tax Residency Certificate that Tiger Global had obtained from Mauritius. However, Tiger Global argues that this was simply an “indirect transfer.” Since they didn’t sell Flipkart India shares directly, they say no Indian capital gains tax applies. 

Why the Supreme Court verdict matters beyond Tiger Global?

If the Supreme Court rules in favor of India’s tax department, foreign investors, including private equity and venture capital funds, as well as multinational companies, are first in line to be affected. 

These investors often route their funds into India through jurisdictions like Mauritius or Singapore and later exit by selling shares indirectly. If the judgment is strict, these transactions could be subject to Indian taxes, even if the sales take place overseas.

Also, SEBI-registered Foreign Portfolio Investors from countries with tax treaties could be the next to be hit. Currently, some of these investors exploit treaty loopholes and pay minimal tax on profits from trading equity futures and options. If the court tightens the rules, those treaty benefits could diminish, and those trading profits would be exposed to higher Indian taxes.

The third group is investors who earned profits from selling shares that were bought before April 1, 2017. This date matters because India changed key tax treaty rules around that time. Many FDI and FPI investors who purchased shares before this cut-off used treaty benefits to claim lower or zero tax on profits. If the Supreme Court supports the tax department’s stand, it could weaken those protections and affect how such old investments are taxed during exits.

Supreme Court Verdict

The Supreme Court has ruled that Tiger Global must pay taxes in India on its $1.6 billion exit from Flipkart, overturning the Delhi High Court’s earlier decision from 2024. In essence, Tiger Global’s Mauritius-based entities cannot use the India–Mauritius tax treaty to avoid capital gains taxes. The Court viewed the entire arrangement as an “impermissible tax avoidance arrangement.”

GAAR, General Anti-Avoidance Rules, were brought into play, stating that once these rules apply, investors cannot rely on Article 13(4) of the treaty. The Supreme Court also clarified that simply having a valid Mauritius Tax Residency Certificate is not enough. If the real management and substance of the transaction are not actually in Mauritius, or if the structure exists mainly to save taxes after April 1, 2017, the exemption does not apply. However, the amount of taxes is not yet fixed and will depend on the profits it made from the sale.

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