New Delhi: Walmart on Thursday said it would comply with any tax demand arising from the purchase of a 77 per cent stake in Flikpart for $16 billion, unlike Vodafone and Cairn Energy which are contesting tax claims by Indian authorities.

The capital gains tax on the Walmart-Flipkart deal could turn out to be a bonanza for the Narendra Modi-government, hit by the spike in crude oil prices and lower-than-expected revenue from the goods and services tax.

"Our intent is, whether looking backwards related to our acquisition here or looking forward, we will be compliant with whatever the tax rules are," Walmart chief executive officer Doug McMillon said.

Revenue officials said the buyout transfer amount would be taxable based on the indirect transfer-related provisions under Section 9(1)(i) of the income tax act introduced in 2012. The section states that income deemed to accrue or arise to non-residents directly or indirectly through transfer of a capital asset situated in India is to be taxed in India with retrospective effect from April 1, 1962.

This provision came after the revenue department had claimed $2 billion in taxes from a $11.2-billion deal between two overseas entities - Vodafone International Holdings (a Dutch subsidiary of Vodafone Plc) and Hong Kong-based Hutchison Whampoa and its associate firms, while selling the Indian arm of Hutch to Vodafone in 2007.

Cairn Energy Plc was also ordered to pay $1.6 billion in taxes for selling a stake in Cairn India Ltd. Both have contested the tax demands.

The road ahead

McMillon further reiterated that the Flipkart deal was good for the country as it would help create millions of jobs over time and help the economy through local sourcing of goods by the company.

McMillon also played down not being able to meet Prime Minister Narendra Modi or any senior minister after announcing the deal, saying he has had meetings with officials in the past and would have them in the future as well.

"We deal with the government at all kinds of levels all the time... we have met before and I am sure will meet again," he said.

Wholesale plans

Walmart said it will continue to grow its wholesale cash-and-carry business, adding 50 new stores in the next four-five years. "We now have 21 stores and plan to open 50 stores in 4-5 years. We expect to open five stores in the current year and eventually start opening 12-15 stores a year," Walmart India president and CEO Krish Iyer said.

Founders emotional

The Bansals of Filpkart may have clinched the biggest deal in e-commerce space, but the jaw-dropping $16-billion transaction left co-founders Sachin and Binny "emotional" and "sad".

"More than anything else, it is a very emotional moment for all of us. Sachin and I go a long way. We met in 2005 when we were passing out (of IIT, Delhi). We were a group of eight friends from IIT Delhi and we used to hang out together all the time and were the best of friends," said Binny, recalling the Flipkart journey.

Asked if he did not try and convince Sachin to stay on, Binny said: "That's an understatement."

In a Facebook post, Sachin said his work at Flipkart "is done" and "it's time to hand over the baton and move on".

"I'll be taking some long time off and focus on finishing a few personal projects which I haven't been able to find time for. Will catch up on gaming (and see what kids are playing these days) and brush up on my coding skills," Bansal said.

Indicating the future plans of the firm, he said Flipkart would be run as a board managed company with Walmart acting as a resource centre.

McMillon said Flipkart group would continue to operate as a separate board-managed company with co-founder Binny Bansal as the CEO.

He said the retailer plans to run its cash-and-carry business and online retail separately for some time and will explore the option of implementing Flipkart's payments ecosystem, including the PhonePe application in other countries.

Flipkart gives Walmart an online presence. So far it had been handicapped by India's retail policy that does not allow overseas companies to sell directly to consumers (except in wholesale cash-and-carry segment).

Companies like Flipkart and Amazon operate as e-commerce marketplaces Ä a segment where 100 per cent foreign direct investment (FDI) is allowed.

Walmart said it will continue to grow its wholesale cash-and-carry business, adding 50 new stores in the next four-five years.

"We currently have 21 stores and plan to open 50 stores in 4 to 5 years. Plans are on track. As we speak, we have a pipeline of 20 stores and we expect to open 5 stores in the current year and then pick up pace and eventually start opening 12-15 stores a year," Walmart India President and CEO Krish Iyer said.

For the cash-and-carry business, Walmart currently operates in 9 states and 19 cities and the future expansion is focused on more or less the same geographies. "We are not spreading thin. We are continuing in same geographies but primarily focus is on Punjab, Haryana, Uttar Pradesh, Uttrakhand, Maharashtra, Andhra Pradesh and Telangana," he said.

At its 21 Best Price wholesale stores, Walmart sells everything from fast-moving consumer goods to furniture to other retailers and institutions. It could potentially use these Best Price stores as pickup and delivery points to service online sales made on Flipkart.

Analysts believe that Walmart's investment in Flipkart, whose 34 per cent market share in India's online sales is ahead of rival Amazon's 27 per cent, will boost the Indian e-commerce company's logistical operations and help it move into new areas such as online groceries.

The deal will give the American retailer a direct link to a market that is expected to be worth $200 billion by 2026. By 2026, online retail is expected to account for 12 per cent of the country's overall retail market, from just 2 per cent in 2016, as per a Morgan Stanley report.