Flipkart deal: Taxman expects Walmart’s withholding tax filing in 15 days


new delhi: The income tax department expects US-based retail giant Walmart to file withholding tax certificates within a fortnight of closing its 77 per cent stake purchase in e-commerce major Flipkart.
This comes a day after the Competition Commission of India gave nod to the Flipkart-Walmart deal.
"Now that the CCI nod has come, we hope that Walmart will close the deal soon and file for withholding tax in another 15 days," said an income tax official on the sidelines of Assocham's tax conference. Withholding Tax is an obligation on the payer (Walmart, in this case) to withhold tax, such as capital gains tax, at the time of making payment for the contract. The obligation to withhold and pay tax lies with the person or entity who pays the beneficiary. Meanwhile, Flipkart has already submitted the share purchase agreement with the tax department. In response to income tax queries, Walmart had provided transaction details to help ascertain tax liability. Many investors in Flipkart, who sold their stakes in the deal with Walmart, are non-residents. Flipkart’s parent entity is registered in Singapore.
SoftBank, Tiger Global, Accel Partners and Naspers were the major foreign investors in Flipkart.
The withholding tax rate in the case of long-term capital gains tax is 10-20 per cent, depending on the nature of the investment. Three months ago, Walmart agreed to buy 77 per cent stake in Flipkart for $16 billion. It is mandatory for all entities, resident and non-resident, having a business connection in India to withhold tax even in cases where a transaction is executed on foreign soil but the underlying asset is Indian.
‘This is based on the amendment on indirect transfers introduced in Section 9(1)(i) of the Income Tax Act as part of the 2012 budget.
The amendment was introduced after the government faced a setback following the Supreme Court order in January 2012, that went in Vodafone's favour.

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