Walmart paid Rs 7.4k crore tax on Flipkart deal

As many as 44 shareholders of Flipkart, including significant ones like SoftBank, Naspers, venture fund Accel Partners and eBay, had sold their holdings to Walmart. The US retail giant on Sept 7, the last date for depositing taxes with the Indian authorities, paid Rs 7,439 crore withholding tax on payments made to 10 shareholders of Flipkart.

“Of the 44 shareholders in Flipkart who have sold shares, Walmart has deposited taxes for only 10 funds and entities. We have asked Walmart to explain the rationale followed while deducting or not deducting taxes from the shareholders. 

They have been asked to give a case to case explanation,” a tax department official said. Withholding tax, or retention tax, is an income tax to be paid to the government by the payer of the income rather than the recipient of the income. The tax is withheld or deducted from the income due to the recipient.

In case of the Walmart-Flipkart deal, the withholding tax pertains to the capital gains made by the shareholders of Flipkart. A Walmart spokesperson said: “We take our legal obligations seriously, including paying taxes to governments where we operate.”

“Following our Flipkart investment, we have completed our tax withholding obligations under the guidance of the Indian Tax authorities. We will continue to work with authorities to respond to their queries,” the spokesperson said without elaborating.

Industry sources said Walmart may have followed the withholding tax provision for small investors in not deducting tax on payments made to them.