Walmart CEO Doug McMillon with Flipkart Co-Founder Binny Bansal (Photograph: Flipkart)

Income Tax Department Probing Tax Issues In Walmart-Flipkart Deal

The Income Tax Department is examining the taxation issues with regard to payments made by Walmart Inc. to various shareholders of Flipkart following the acquisition of the e-commerce firm, a senior finance ministry official said on Tuesday.

The U.S. retailer had purchased a 77 percent stake in Flipkart for about $16 billion in May.

"We already have full details of all the payments made by Walmart to different investors. In some of the cases, taxes have been withheld. In many other cases, taxes have not been withheld, that's what we are examining right now.”

"We have asked those investors to give us details to show why they are not taxable," Central Board of Direct Taxes member Akhilesh Ranjan said on the sidelines of a Confederation of Indian Industry event.

As many as 44 shareholders of Flipkart, including significant ones like SoftBank, Naspers, venture fund Accel Partners and eBay, sold their holdings to Walmart. The income tax law requires the buyer to withhold tax while making payment to the sellers, in case they are not exempted from levy of capital gains tax.

The CBDT member further said the revenue department has sold almost all of Cairn Energy Plc's attached shares to recover part of the Rs 10,247-crore retrospective tax demand.

Also read: Walmart’s Flipkart Buy Is World’s Most Expensive Facelift, Says Ashwath Damodaran

Ranjan, who was recently appointed to head the new direct tax code panel, said though administration of General Anti-Avoidance Rule is complex, it would be used in worthwhile cases.

He further said that as head of the new direct tax code panel, his endeavour will be to simplify the direct tax law and remove ambiguities. Walmart has reportedly paid over Rs 7,439 crore as taxes to the government on payments made by it to major shareholders of Flipkart.