New Delhi: Walmart Inc. has apparently met tax obligations of its $16 billion acquisition of Flipkart, going by an initial look at the detailed explanations provided by the US retail giant, an income tax department official has said.
After Walmart made over Rs 7,400 crore of tax payments last month as tax deducted at source on its payments to various shareholders of Flipkart, the income tax department asked the US retailer to furnish a shareholder-wise account of tax deducted at source and reasons where it had not done so. “Walmart has given its reply. We are examining it. As of now, there is no concern of default in Walmart’s liability to deduct tax at source and pay to the Indian government. If we notice any discrepancy, we shall take it up with the taxpayer,” said the official who spoke to Mint on condition of anonymity.
After completion of the transaction, Walmart held 77% in Flipkart, the companies said on 18 August. Walmart, which has committed future investments into its India operations, banks on a growing middle class and internet usage for its fortunes.
A Walmart spokesperson said in response to an emailed query that the company took its legal obligations seriously, including paying taxes to governments where it operated. “Following our Flipkart investment, we completed our tax withholding obligations under the guidance of the Indian tax authorities. In future also, we will continue to work with the authorities to respond to their queries, if any.” said the spokesperson.
Walmart meeting tax obligations arising from this deal is a significant milestone in India’s record of taxing cross-border transactions, which has been marred by lengthy litigation and controversial tax law amendments. In 2012, India amended the Income Tax Act retroactively to impose tax liability on Vodafone Group Plc.’s $11 billion purchase of Hong Kong-listed CK Hutchison Holdings Ltd.’s telecom business in India after the Supreme Court ruled in January that year that the transaction which took place in 2007 was not taxable. That case is under international arbitration.