Jayati Ghosh & Diego Llumá
In January, India’s Supreme Court ruled that the US-based hedge fund Tiger Global must pay taxes on its $1.6 billion sale of a stake in the e-commerce platform Flipkart to Walmart. The ruling, delivered just days before the EU-India Free Trade Agreement was announced, shows that at least some Indian institutions remain committed to defending the country’s eroding tax base.
The Court’s decision stands in sharp contrast to the government’s economic agenda. In 2019, Prime Minister Narendra Modi slashed corporate tax rates, sacrificing public revenue even as companies nearly quadrupled their profits, wages stagnated, and private in vestment fl atlined. Rather than change course, the government has doubled down.
The Tiger Global ruling comes at a moment when fiscal ground rules are more important than ever but are increasingly under threat. In recent years, India’s digital economy has expanded rapidly, powered by the Unified Payments Interface (UPI), which was launched a decade ago and is now the world’s largest real-time payment system. The resulting “instant commerce” boom has generated sharply rising revenues for global giants like Amazon and Walmart, whose business models rely on intense competition to deliver goods in under ten minutes, often at the expense of delivery workers.
Despite their growing revenues, these companies pay little or no tax in India by reporting losses instead of profits from their local operations. Their tax avoidance strategies were reinforced by a 2025 Delhi High Court ruling that payments to foreign cloud service providers are not considered royalties or fees for technical services under Indian tax law or the India-US Double Taxation Avoidance Agreement (DTAA).
In response, tax authorities have tightened withholding rules under the Income Tax Act, introduced levies on digital services, and adjusted the Goods and Services Tax framework to cover cross-border digital transactions. But these efforts have been undermined by the government’s latest budget, announced on February 1, which grants generous long-term tax incentives to global cloud providers – including a 20-year tax holiday for data centres – and offers greater “transfer pricing certainty” to tech-driven firms.
Against this backdrop, the dispute between India’s tax authorities and Tiger Global – one of the world’s most aggressive hedge funds – illustrates how multinationals use complex legal structures to minimise their tax liabilities. Between 2011 and 2015, Tiger Global acquired shares in Flipkart’s Sin gapore holding company, which held stakes in multiple Indian companies. These investments were made through three Mauritius-based entities, which in turn were owned by Cayman Islands private equity funds managed by Tiger Global.
When Tiger Global sold those shares to Walmart in 2018, it claimed exemption from capital gains tax under the India-Mauritius DTAA. Indian tax authorities challenged the claim, and after a years-long legal battle that included multiple lower-court decisions, ultimately prevailed.
The original 1982 India-Mauritius tax treaty had long been exploited by foreign companies engaged in so-called “treaty shopping.” For over two decades, more than $171 billion in foreign investment flowed into India via Mauritius, largely for tax reasons. This led to a renegotiation of the agreement in 2016, which granted authorities the right to tax shares acquired after April 2017. Since then, Singapore has largely replaced Mauritius as the preferred financial gateway into the Indian market.
Applying this revised framework, the Supreme Court held that the Mauritius entities used by Tiger Global were mere conduits, lacking any genuine commercial purpose beyond extracting value from India and shifting profits to low-tax jurisdictions. The Court rejected the argument that a Mauritian tax residency certificate alone entitled the firm to tax exemptions. Instead, it declared the trans action “an impermissible tax avoidance arrangement” and affirmed that “taxing income arising from within its own borders is an inherent sovereign right of a country.”
The Court’s decision, which could leave Tiger Global with a $1.5 billion tax bill including penalties, sends a powerful message: companies doing actual business in India have nothing to fear, but those routing investments purely to dodge taxes will face serious financial and reputational costs.
The question now is whether Modi’s government will stand by this sensible outcome or undermine it through new tax concessions. India’s recent trade deals with the European Union and the United States offer little cause for optimism. While the full agreements remain under wraps, what has been revealed is troubling. For example, reports suggest that the EU-India trade treaty includes “modern digital trade rules designed to facilitate business,” along with other tax-related measures that may be buried in the fine print.
Then there is the Donald Trump factor. Earlier this year, the Trump administration pressured members of the OECD/ G20 Inclusive Framework to exempt US-based multinationals from the global minimum tax. The US-Indonesia trade deal went even further, forcing the Indonesian government to abandon planned tariffs on cross-border data flows and support the renewal of the World Trade Organisation’s moratorium on e-commerce duties.
More broadly, the notion that developing countries must tolerate tax avoidance to attract investment does not withstand scrutiny. Investment decisions are driven primarily by market size, growth prospects, infrastructure quality, and labour skills, not by the availability of tax loopholes. India’s vast consumer market, skilled workforce, and advanced digital infrastructure would make it an attractive destination for foreign companies without shell-company-based tax planning.
Tiger Global is a case in point. India’s digital ecosystem was built by Indian institutions, funded by Indian taxpayers, and sustained by Indian consumers. When Tiger Global realised $1.6 billion in profits from selling its stake in Flipkart, it monetised publicly built infrastructure and the network effects created by India’s digital transformation.
No treaty loophole should allow foreign investors to prof it from India’s infrastructure while contributing nothing to the tax base that sustains it. The Supreme Court has affirmed that principle. It now falls to the Indian government to reinforce it by asserting tax sovereignty rather than diluting it through opaque, exploitative trade deals.
Jayati Ghosh is Professor of Economics at the University of Massachusetts Amherst. Diego Llumá is Global Communications Manager at the Independent Commission for the Reform of International Capital Taxation.
