Indian govt reaps Rs 10,000 crore tax bonanza from Flipkart deal

Walmart's acquisition of 77 per cent stake in Flipkart has made the income tax department richer by over Rs 10,000 crore after the American retail giant agreed to pay all dues in consultation with the government. The payment by Walmart brings to an end the uncertainty regarding tax dues related to the $16-billion transaction, which included a $2-billion fresh investment. As a result, the taxes were paid on the basis of the share sale estimated at $14 billion.

While Walmart confirmed that it had cleared the tax liability, it did not mention the amount. "We take our legal obligations seriously, including paying taxes to governments where we operate. Following our Flipkart investment, we have now completed our tax withholding obligations under the guidance of the Indian tax authorities," a company spokesperson said in response to a questionnaire from TOI.

On August 10, TOI had reported that the Walmart-Flipkart deal will help the government mop up $1.5-2 billion in taxes.

A team of executives from Walmart's headquarters in Bentonville had held discussions with Akhilesh Ranjan, who heads the foreign taxation unit in the income tax department. The entire deal had become controversial after some of the sellers sought exemptions from paying capital gains tax. The government had rejected the demand for an exemption and fixed September 7 as the deadline for clearing dues.

A bulk of the tax accruing to the Centre from the deal will be in the form of withholding tax that has been paid by the American giant on behalf of those selling shares such as SoftBank, eBay and Naspers. Additionally, Indian investors - including Flipkart co-founder Sachin Bansal - have also made some payments but the break-up was not immediately available.

The tax department has been keeping close tabs on the transaction and had raised queries as soon as the deal was finalised as it was keen to avoid a repeat of a Vodafone-type situation where the telecom company did not deduct tax dues before closing the deal with Hutchison Whampoa.