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Flipkart acquisition: Walmart paid witholding taxes for only 10 stakeholders out of 44

Walmart might have followed the withholding tax provision for small investors in not deducting tax on payments made to them, say legal experts

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Harsh Upadhyay
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The American Multinational retail chain Walmart's backdoor entry in India through a $16 billion investment in Flipkart, making it a majority owner in Indian e-commerce company has now been pulled up by the tax man.

The tax department in India is meticulously looking into each and every detail of the $16 billion acquisition deal concluded in August, as the tax obligation by Walmart is yet to be completed.

The US-based retail giant had recently deposited a whopping sum of Rs 7,439 crore as withholding tax to buy out shares of stakeholders in the Bengaluru-based e-commerce marketplace.

However, the Indian tax department clarified that of the 44 shareholders, the retention tax for only 10 of them has been paid by Walmart and the remaining tax for 34 shareholders is still unpaid.

The tax sleuths had earlier given a timeline of September 7 to pay the tax and Walmart had reportedly paid the aforementioned amount to meet the deadline. Further, Tax department also asked the company to give details before September 17 on break up of withholding tax.

Earlier, it was expected that Walmart would pay around $2 billion as withholding tax to acquire 77 per cent stake in Indian e-commerce major. According to legal experts, Walmart might have paid the amount for only 10 major stakeholders including SoftBank, Tiger Global, Naspers, Accel Partners and followed the withholding tax provision for small investors in not deducting tax on payments made to them.

Experts also say that Walmart is legally not required to withhold tax on payments made to foreign shareholders with a stake of less than 5 per cent and no right to management, reports Mint via PTI.

While the withholding tax dilemma will take some more time to solve, many small investors of Flipkart had reached out to tax department for exemption under India-Singapore double tax avoidance treaty.

Separately, traders body CAIT, which opposed the deal since it came to light, has announced a 90-days protest march starting from 15th September.

Called as 'Sampoorna Kranti Rath Yatra', the protest march led by CAIT secretary general Praveen Khandelwal will cover 22,000 kilometres in 28 states, including 120 cities and 500 towns.

Apart from the Rath Yatra, the traders body has also announced "Bharat Trade Bandh" on September 28 to protest against the Walmart-Flipkart deal and FDI in retail.

Khandelwal, who also targeted Amazon and Alibaba for entering India like Walmart, claimed that nearly seven crore establishments are expected to down shutters during the September 28 bandh.

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