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?
FlipkartWalmart judgment impact on FII/FDI and startup investment climate: risks to inflows and measures to preserve investment appeal Strict judicial interpretation of cross-border tax doctrines and anti-avoidance principles can increase uncertainty for foreign institutional and direct investors in high-growth, loss-making startups, potentially chilling FII/FDI inflows and affecting employment and growth; this may operate by expanding taxable nexus and recharacterising transactions, thereby raising compliance and tax risk for investors. To balance revenue protection with investment attraction, recommended responses include clear administrative guidance, treaty clarification and certainty mechanisms, safe-harbour rules, targeted incentive regimes, and enhanced dispute resolution pathways, while startups should strengthen economic substance, document valuation and commercial rationale, optimise investment structures, and adopt robust transfer pricing and treaty position documentation to retain global investor appeal. (AI Summary)
TaxTMI 
TaxTMI 
TaxTMI 
