SC ruling in Tiger Global case may open up a ₹20,000 crore opportunity

The top court allowed authorities to tax the capital gains from Tiger Global's $1.6 billion stake sale in Flipkart in 2018

The Supreme Court’s ruling in the Mauritius-based Tiger Global International (TGI) case could open up a ₹20,000 crore opportunity for tax authorities, Moneycontrol reported.

 

The top court on Thursday allowed authorities to tax the capital gains from Tiger Global’s $1.6 billion stake sale in Flipkart in 2018. The latest ruling overturns an earlier Delhi High Court order that was in favour of the Mauritius-based company.

 

According to the report, the judgment will allow tax officers to closely examine similar foreign investment structures and raise additional revenue in future cases.

Why is this important?

Tax experts say this is a major judgment because it gives Indian tax authorities more power to deny tax benefits claimed under treaties by foreign companies.

   

Earlier, many foreign investors relied on a Tax Residency Certificate (TRC) to claim tax relief under international tax treaties. A TRC proves that a company is legally based in a particular country.

 

Under the India-Mauritius treaty, companies based in Mauritius were usually not required to pay tax in India on capital gains. This ruling, however, states that a TRC alone is insufficient if the company does not have genuine business activity in that country.

₹20,000 crore opportunity

Tax authorities are now expected to examine other similar cases involving foreign investors closely, Moneycontrol reported. Such reviews could help the government raise more than ₹20,000 crore in additional tax revenue over time.

 

The tax department is likely to recover around ₹14,500 crore from Tiger Global.

Impact on foreign investors

Industry experts say the judgment may push foreign investors to rethink how they hold investments in India.

 

According to PTI, tax experts say the Supreme Court’s ruling takes a tougher line on tax treaties and stresses real economic substance over legal form. Nangia Global Partner Sandeepp Jhunjhunwala said the verdict signals a “stricter approach to tax treaty interpretation” and makes it clear that a TRC alone is not enough.

 

Grant Thornton Bharat Tax Partner Richa Sawhney echoed similar views, saying the ruling shows that a TRC is “no longer a guaranteed gateway to treaty relief”. She said taxpayers should reassess their structures.

 

EY India’s Pranav Sayta noted that while the case relates to the India-Mauritius treaty, its principles could also affect other treaties, including India-Singapore.

What is the case about?

The case relates to Tiger Global’s exit from Flipkart after Walmart bought the company in 2018. As part of the deal, Tiger Global sold its shares and made capital gains.

 

Tiger Global claimed it was based in Mauritius and submitted valid TRCs. It also applied for a certificate in India stating that no tax should be deducted on the transaction.

 

However, Indian tax authorities rejected this and said the company was effectively run from the US and that the structure was meant to avoid tax.