Scrutinise Walmart deal: CAIT

Scrutinise Walmart deal: CAIT

Traders' body CAIT demanded scrutiny of the proposed $12-billion Flipkart-Walmart deal.

While Flipkart is reportedly inching closer to sealing the deal to sell its majority stake to the United States retail giant for at least Dollars 12 billion, SoftBank is yet to finalise on the portion of its 20 per cent holding it will sell and the time of the deal.

Also voicing a strong objection to the proposed Walmart-Flipkart deal is the RSS-affiliated trade body Swadeshi Jagran Manch (SJM).

CAIT has asked the government to form a regulatory authority for e-commerce and till the authority is formed no such deal should be allowed.

CAIT said, "It's really unfortunate that inspite of having a clear Foreign Direct Investment (FDI) policy, the foreign companies are finding escaping route whether it is in retail or e Commerce".

Walmart has limited presence in India through its conventional physical retail operations, but the acquisition of Flipkart will give it a huge foothold over the e-commerce segment in India.

According to the information of the source, Walmart-Flipkart deal has raised up elevated the specter of predatory pricing in the domestic online retail marketplace. A final decision may come next week after discussions with tax experts over the issue, they said. At the time, tax department did not raise a tax demand as the deal was done offshore.

The matter went to court and the Supreme Court in January 2012 ruled in Vodafone's favour, saying it was not liable to pay any tax over the acquisition of assets in India from the Hong Kong-based Hutchison. Softbank, one of Flipkart's investors, have been caught wrong footed not expecting a deal to close quickly.

Walmart aren't going it alone however, it appears that Google's parent company Alphabet is grabbing a stake of perhaps 10% in a $20 billon valuation.

According to a report in The Indian Express, there could be a tax liability given that a substantial value in the target company (Flipkart) is derived from India. As per Section 9 (1) of the Income Tax Act if the value of the Indian assets is more than 50% of the global assets, the shares will be deemed as Indian shares and gains if any will be liable to tax in India.



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