The Supreme Court’s ruling that capital gains from Tiger Global’s exit from Flipkart are taxable in India is being seen by tax experts as a watershed moment in India’s international tax jurisprudence. The judgement raises concerns over tax certainty for foreign investors and prompting a possible rethink of long-standing investment structures routed through treaty jurisdictions such as Mauritius.
A bench led by Justices JB Pardiwala and R Mahadevan held that capital gains arising from Tiger Global’s 2018 stake sale in Flipkart to Walmart are liable to tax in India. The court underlined India’s sovereign right to tax income generated within its territory and ruled that benefits under the India–Mauritius Double Taxation Avoidance Agreement (DTAA) cannot be claimed automatically when facts indicate treaty abuse.
Tax experts noted that the ruling could have implications beyond the Tiger Global case, including for investments that were earlier considered ‘grandfathered’ under the India–Mauritius tax treaty. Such structures may now be examined more closely for their economic reality rather than relying solely on treaty protection.
A tax expert said the earlier legal and administrative framework was designed to provide certainty to overseas investors. However, the the Supreme Court’s current interpretation "has the potential to significantly erode certainty and unsettle long-standing assumptions relied upon by both FDI and FPI investors when structuring investments and exits,” he added.
Another analyst said the judgement appears to disturb settled law and the views of a larger bench. “Applying GAAR to transactions that were explicitly grandfathered raises serious questions. While India has tax sovereignty, once the executive grants certainty through policy, it must be respected. You cannot keep unsettling it.”
The analyst cautioned that the ruling could heighten investor concerns around tax certainty, a key factor in cross-border capital flows.
The ruling’s ripple effects could extend across the private equity and M&A landscape. “The Tiger Global case will impact current and past M&A transactions where treaty benefits have been claimed. Private equity investors and FPIs will need to reassess their structures and rework return expectations,” a tax expert noted, adding that tax litigation and demand for tax insurance could rise.
Yet another analyst described the judgement as a “decisive shift” in India’s treaty interpretation, particularly for Mauritius-based structures. “The court has made it clear that possession of a tax residency certificate alone does not shield transactions from scrutiny if there is a lack of commercial substance.”
Experts cautioned that the verdict could prompt private equity, venture capital, and foreign portfolio investors to re-evaluate treaty-dependent structures, potentially weighing on foreign inflows at a time when capital availability remains critical for India’s growth ambitions.
