For decades, global investors used a strategy known as “treaty shopping”. They set up entities in jurisdictions like Mauritius or Singapore, where India had favourable tax treaties that allowed them to avoid paying capital gains tax on their investments in India. This became a widely‑used strategy: Invest through a tax haven, exit through that same jurisdiction, and legally pay zero capital gains tax in India.
But things are about to change drastically now.
Tiger Global sold its stake in Flipkart to Walmart for $1.6 billion, arguing that it owed India nothing because the shares were held through a Mauritius‑based entity and were acquired before April 1, 2017—the cutoff date after which India amended the tax treaty to allow taxation of capital gains. However, Indian tax authorities disputed this, arguing the Mauritius companies were mere conduits and raised a tax demand of Rs 14,500 crore (about $1.7 billion) in earlier proceedings.
On 15 January 2026, the Supreme Court of India ruled against Tiger Global, holding that the US investment firm must pay capital gains tax on its 2018 Flipkart stake sale to Walmart. The court said the transaction amounted to impermissible tax avoidance, overturning the earlier relief granted by the Delhi High Court. The landmark ruling signals a fundamental shift in how India views—and will now police—treaty‑based tax structuring with an emphasis on substance over form.
"The Court clarified that GAAR can apply to any arrangement where a ‘tax benefit’ is claimed on or after April 1, 2017, making both the investment cut-off date and the longevity of the structure irrelevant if it lacks commercial substance,” says Amit Baid, head to tax, BTG Advaya, a disputes and transactional law firm. “The ruling has serious implications for private equity funds, hedge funds and FPIs using Mauritius and Singapore-based structures, including for pre-2017 investments. While it does not automatically reopen closed cases, it significantly strengthens the tax department’s hand in reassessment proceedings where permitted by law."
Under Section 112A of the Income‑tax Act, long‑term capital gains (LTCG) on listed equity shares (including shares sold via an Offer for Sale (OFS) in an IPO when conditions are met, and on‑market bulk deals after listing) are taxable in India at a concessional rate (raised to 12.5 percent on gains above the threshold from 23 July 2024, plus surcharge and cess). That means offshore investors can no longer assume automatic exemptions at exit; withholding/TDS and substance checks are now very real parts of the playbook.
With this judgment, several major cross‑border deals structured through Mauritius or Singapore—especially those relying on pre‑2017 “grandfathered” protections—may now face heightened scrutiny. Forbes India takes a look at some of the deals and firms now potentially at risk:
First Published: Jan 16, 2026, 16:55
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