Walmart pays tax but silent on amount

Retail giant Walmart on Friday said it had complied with tax obligations for the $16-billion deal to buy out a 77 per cent stake in Flipkart.

By Our Special Correspondent
  • Published 8.09.18

New Delhi: Retail giant Walmart on Friday said it had complied with tax obligations for the $16-billion deal to buy out a 77 per cent stake in Flipkart.

"We take our legal obligations seriously, including paying taxes to governments where we operate. Following our Flipkart investment, we have completed our tax withholding obligations under the guidance of the Indian tax authorities," a Walmart spokesperson said in a statement.

However, the company did not disclose the amount deposited with the tax authorities.

According to the income tax rules, Walmart has to deduct withholding tax on payments made to sellers and deposit it with the Indian authorities on the seventh day of the subsequent month, which in this case is September 7.

Of the 44 shareholders of Flipkart who had sold stake to Walmart, the significant ones include SoftBank, Naspers, Accel Partners and eBay. Co-founder Sachin Bansal has also sold his stake to the US retail major.

Revenue officials had said the buyout transfer amount will be taxable under the provisions of Section 9(1)(i) of the Income Tax Act introduced in 2012. According to the section, the income deemed to accrue or arise to non-residents directly or indirectly through the transfer of a capital asset situated in India is to be taxed in India with retrospective effect from April 1, 1962.

Rakesh Nangia, managing partner at Nangia & Co LLP, said, " Even though the shares of Flipkart Singapore will be transferred to Walmart, gains arising from such transfer could be subject to tax in India considering that a substantial value of such shares is being derived from India."

NCLAT seeks clarity

The National Company Law Appellate Tribunal (NCLAT) has asked Walmart and Flipkart to explain their way of doing business in India.

The NCLAT, which is also an appellate authority over the Competition Commission of India (CCI), has asked Wal-Mart International Holdings Inc to file its reply by September 20, 2018.

It has also asked trader's body CAIT, which had filed an appeal before the NCLAT challenging the go-ahead by fair trade regulator CCI to the deal, to file its understanding of Walmart's business model in India.

"Before going into the merit of the appeal, we intend to know the manner in which Wal-Mart International Holdings Inc and Flipkart Private Ltd do their business in India," said the NCLAT bench headed by chairman Justice S. J. Mukhopadhaya.