The apex court has ruled that capital gains arising from Tiger Global’s sale of its Flipkart stake to Walmart are taxable in India, calling the Mauritius route “treaty shopping” and firmly backing India’s right to tax income generated here. The verdict could potentially expose the global investor to a tax bill of over ₹14,500 crore and has sparked debate over whether foreign capital may turn cautious.
However, leading investors told CNBC-TV18 that the ruling is unlikely to derail India’s startup story. Siddarth Pai, Founding Partner of 3one4 Capital, said India’s attractiveness as an investment destination does not hinge on tax alone. “The attractiveness of the Indian startup ecosystem is not actually contingent on taxation,” Pai said, pointing to India’s large consumer base, fast growth and deep talent pool. He added that while tax considerations do play a role in investment decisions, they are not decisive.
Pai said the ruling sends a clear message to global funds that tax optimisation cannot be the primary objective. “Investors who try to optimise primarily for tax need to get rid of that notion and work much harder to generate higher market returns,” he said, noting that recent startup IPOs have shown India can deliver “eye-watering returns” without aggressive tax planning. According to him, the uncertainty around the Mauritius route has effectively ended, and more investors are likely to invest directly into India rather than through intermediary jurisdictions.
Mitesh Shah, Co-Founder of Inflection Point Ventures, echoed that view, saying India’s growth potential remains intact. “Taxation is a byproduct. When you make gains, you pay tax—simple as that,” Shah said, adding that the court has reinforced the principle of substance over form. He believes the ruling will not deter serious investors and could even encourage the use of domestic structures such as GIFT City. Shah also stressed that having real management and operational substance in the chosen jurisdiction will define future investment strategies.
From a tax advisory perspective, Ajay Rotti, Founder and CEO of Tax Compaas, said the shift away from tax-driven structures has been underway for years. “You can’t let the tail wag the dog. Tax has to be a consequence of commercial activity,” Rotti said, adding that the Supreme Court verdict has only sealed a trend the industry was already following. He noted that a similar ruling years ago would have been disruptive, but businesses today are better prepared.
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Rotti did caution that the judgment may revive concerns around tax certainty, especially since the court has ruled that a Tax Residency Certificate alone is not sufficient to claim treaty benefits. He warned that this reasoning could extend beyond Mauritius to other treaty jurisdictions such as Singapore or the Netherlands, potentially affecting a wide range of transactions. Still, he maintained that at a principle level, the verdict will not change how genuine businesses structure themselves.
On the question of reopening past deals, Pai said the application of anti-avoidance rules could prompt tax authorities to re-examine certain exits, particularly where substance is lacking. Even so, Shah dismissed fears among founders that global capital might dry up, saying India will continue to attract funding given the value it creates.
Overall, investors and advisors agree that the ruling marks the end of tax-led structuring, not the end of foreign interest in Indian startups. As Rotti summed it up, the message is clear: let business drive tax, not the other way around.
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