The traders' body demanded that the government form a regulatory authority for e-commerce and till the authority is formed, no such deal should be allowed.
As much as Dollars 2.1 billion worth of M&A (merger and acquisition) transactions were inked in 2017 in the booming Indian e-commerce industry, which may soon witness its largest-ever deal - the proposed Flipkart-Walmart nuptial. A final decision may come next week after discussions with tax experts over the issue, they said.
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Traders' body CAIT demanded scrutiny of the proposed $12-billion Flipkart-Walmart deal. "Walmart, after failing to enter India in retail sector through FDI, has chosen the e-commerce route, which will be quite harmful for the trading community", the industry body said in the letter. "The scenario after the Walmart-Flipkart deal will be worse than ever for both offline and online traders", Praveen Khandelwal, national general secretary, CAIT, said in the letter dated May 7.
In 2007, Vodafone acquired Hong Kong-based Hutchison Telecommunication International's 52% stakes in Hutchison Essar, the fourth largest telecom operator in the Indian market, in a transaction that took place in Cayman Island. Vodafone challenged tax department's claim and the matter is now under arbitration. Under the deal Japan's SoftBank Group will sell its interest in Flipkart which is estimated to be more than 20% via an investment fund.
According to sources, Walmart will pump in about United States dollars 15 billion along with Google's parent Alphabet to pick up majority stake in the company, valuing the Indian e-tailer at a whopping USD 20 billion. "Now that the rules are clearly written out, in any such transaction the 50% threshold is looked at and depending on the outcome and other factors such as treaty benefits, etc, the taxes are being paid and applicable reporting is also being made", Abhishek Goenka, partner and leader, corporate and worldwide tax at PwC, told the Indian Express. However, analysts said a deal with Flipkart would have raised competition concerns and voiced scepticism about the likelihood of a late-in-the-day bidding war. This delay is expected since it is considering to seal the deal without attracting a hefty tax liability, reported the publication quoting its sources familiar with the matter.