Impact of the Flipkart–Walmart landmark judgment on FII/FDI and startup investment climate

[Fahiyaz Ahmmed]

Dear Experts,

While the Supreme Court's judgment in the Flipkart-Walmart deal is legally correct under DTAA and GAAR principles, what could be its broader impact on FII and FDI inflows, especially in loss-making but high-growth startups where investments are based on future valuation rather than current profits? As India positions itself as the world’s third-largest economy, but with relatively low per-capita income and currency pressure against the US dollar, does such a strict interpretation risk creating a bottleneck for foreign investment, employment generation, and GDP growth? What liberal policy or legal reforms can the government consider to balance revenue protection with the need to attract long-term FII/FDI, and what remedial steps should startups adopt to remain attractive to global investors post this landmark judgment?

[Sadanand Bulbule]

The Supreme Court’s interpretation is legally correct and aligned with global anti-abuse norms. However, without clear policy guidance and prospective certainty, such strict interpretation risks increasing the cost of capital, dampening FII/FDI sentiment-especially for high-growth startups-and creating uncertainty in investment flows and economic growth. A balanced approach through clear tax rules, substance-based incentives, and modernised tax treaties is essential to protect revenue while sustaining investor confidence, jobs, and long-term growth.

[Fahiyaz Ahmmed]

Thank you sir your valuable reply 

 

AI Summary

Flipkart-Walmart judgment's strict GAAR and DTAA reading may raise risks and costs for foreign investment in startups. Strict application of GAAR and a narrow DTAA reading in the Flipkart-Walmart judgment prioritises substance over form, increases scrutiny of treaty benefits and tax driven structures, and may raise risk and cost of capital for foreign investment in high growth, loss making startups; policymakers should offer prospective clarity, substance based incentives, and treaty modernisation, while startups should bolster commercial substance and documentation.