Foreign investors and private equity firms in India are reassessing their exposure after a landmark Supreme Court ruling strengthened the government’s hand in cross-border tax disputes, raising concerns over policy certainty and retrospective scrutiny.
On 15 January, the Supreme Court of India ruled that Tiger Global must pay Indian tax on gains from its 2018 sale of a stake in Flipkart to Walmart. The judgment overturned a 2024 Delhi High Court decision that had allowed treaty-based tax relief under the India–Mauritius agreement.
The ruling signals a tougher interpretation of tax treaties, allowing authorities to deny benefits if offshore structures lack genuine commercial substance—even when valid tax residency certificates exist. Legal experts warn the decision could reshape exit strategies for foreign investors and reopen transactions long considered settled.
At the heart of the case is a 2018 deal in which Tiger Global sold its entire 17% Flipkart stake for about $1.6bn, routing the investment through Mauritius-based entities. Indian tax authorities argued these entities functioned as conduits designed to avoid tax. The court agreed, holding that certificates alone do not guarantee treaty protection if entities do not conduct real business.
One of the judges emphasized that taxing income arising within a country is a core sovereign right, underscoring the court’s stance against aggressive offshore structuring.
While the precise tax liability for Tiger Global remains unclear, advisers say the ruling has heightened anxiety across the investment community. Lawyers report clients are bracing for deeper scrutiny of pre-2017 deals—previously assured protection after India amended its tax rules in 2016 to tax capital gains on Indian shares.
The decision also carries broader implications as India and Mauritius agreed in 2024 to amend their treaty to exclude shell companies—a protocol yet to take effect. Between 2000 and March 2025, Mauritius accounted for nearly a quarter of all foreign direct investment into India, highlighting the potential scale of impact.
Tax professionals caution that while the ruling aligns with existing law, it undermines confidence in long-standing assurances, forcing investors to revisit valuations, due diligence, and deal structures. With global capital already strained by geopolitical risks, analysts warn the judgment could cool foreign inflows as investors reassess how—and where—they invest in India.
