Walmart Assures To Fulfil Tax Obligations Of Flipkart Deal

SUMMARY

• Walmart plans to complete Flipkart deal by end of 2018 and raise funds for it by June 2019
• The US retailer has assured the I-T authorities that it will fulfil all regulatory requirements
• Walmart said it will work with Indian authorities to address their inquiries

Even as global retailer Walmart tries to convince the Competition Commission of India (CCI) to give it the necessary approval to its recent acquisition of Flipkart, it has now assured the Income Tax (I-T) authorities that it will comply with all the tax obligations related to the deal.

In a letter, Walmart said that it would fulfil all the regulatory requirements and get the tax implications of the deal examined.

Walmart’s letter follows a letter by the I-T department of India, which offered Walmart assistance, if required, in determining the tax liability and informed it about the tax laws on indirect transfers.

It is mandatory for all entities, resident and non-resident, having a business connection in India to withhold tax even if a transaction is executed on foreign soil but the underlying asset is Indian. This is subsequent to the amendment on indirect transfers that was introduced in Section 9(1)(i) of the Income Tax Act as part of the 2012 budget.

In a statement, a Walmart spokesperson said, “We take seriously our legal obligations, including the payment of taxes to governments where we operate. We will continue to work with Indian tax authorities to respond to their inquiries.”

While Walmart has targeted to raise funds for the Flipkart acquisition by June 2019, it plans to close the $16 Bn deal for 77% stake by the end of 2018.

The deal has evoked protests and criticism from various quarters, with the most vociferous ones being from traders’ bodies.

At the same time, the companies are surrounded by continuous protests by traders’ body and associations, which have also set on a dharna to protest the deal. The CAIT had threatened a nationwide agitation if the government cleared the Walmart-Flipkart deal.

On being questioned about protests by trade associations against the deal, Flipkart co-founder Binny Bansal deflected the question, saying it fell under “Walmart’s domain”.

In a written submission for approval for the deal, Walmart tried to address the CCI’s concerns by saying that the relevant market for the proposed transaction is the pan-India market for B2B sales.

The Indian government has already set up an ecommerce think tank to take proactive action on issues related to the $200 Bn worth ecommerce market. How Walmart addresses the protests and criticisms remains to be seen.

[The development was reported by ET.]