As the Walmart-Flipkart deal received a nod from the Competition Commission of India, the government of India will gain a windfall tax collection of $2 billion or Rs 13,000 crore, according to a report in The Economic Times.
It may be recalled that much before the deal was officially announced by both the parties, the Indian Income Tax authorities wrote a soft communication to both of them raising the issue, explaining that there will be tax implications in the deal and that if either Walmart or Flipkart (with its parent company registered in Singapore) had any doubts in the matter, the department will be willing to offer its consultations and assistance.
Walmart took its time to respond to this letter but it eventually did, confirming that it believes in complete compliance with local regulations in all the countries that it operates in and that it will abide by the Indian laws as well.
It is learnt that Walmart will now issue cheques to the different stake holders after retaining the tax component and issue the certificates to them after remitting it to the government.
If all these happen as indicated, in one way, the current government has handled the matter quite amicably. They would have been guided by the mess-up that occurred during the previous regime when the British telecom giant Vodafone acquired Hutchison Whampoa and the issue is still to be settled.
The sellers like SoftBank have also reconciled to receiving the net amount from Walmart after tax deductions. It its case the liability could be in the region of $600 million. SoftBank alone would gain around 60% on the amounts it had invested in Flipkart. The others figuring in the list will be eBay, Naspers and co-founder Sachin Bansal.
Walmart would also heave a sigh of relief after the CCI gave its approval since those opposed to the deal included Swadeshi Jagran Manch, an outfit close to the ruling dispensation, at least at the ideological level and the trade associations, CAIT and All India Online Vendors Association. Flipkart has tried to assure the small retailers that their business will not get affected by their taking over Flipkart.