Tax battles between India and foreign companies have repeatedly tested investor confidence, often stretching into years of litigation and arbitration. From multibillion-dollar merger disputes to allegations of customs duty evasion, these cases illustrate why tax certainty remains a sensitive issue for overseas businesses operating in the country.
Foreign executives have long complained that unclear rules and aggressive enforcement can turn major investments into drawn-out legal fights. Indian authorities, for their part, argue they are simply closing loopholes and ensuring companies pay what they owe under domestic law. The clash between those positions has produced some of the most closely watched tax cases in India’s recent history.
From treaty challenges to customs disputes
One of the most significant rulings came this month, when India’s Supreme Court held that Tiger Global must pay tax on its $1.6 billion sale of a stake in Flipkart to Walmart in 2018. The court rejected Tiger Global’s reliance on the India–Mauritius tax treaty, finding the structure amounted to an impermissible tax-avoidance arrangement. The decision is widely seen as a turning point in how India treats cross-border investment routes.
Disputes over import classification have also sparked major cases. South Korea’s Kia has been accused of evading about $155 million in taxes by shipping car components separately and paying a lower duty than would apply to fully knocked-down units. Kia is contesting the claim in talks with Indian officials. A similar issue has entangled Volkswagen, which challenged a $1.4 billion tax demand in a Mumbai court, warning that the size of the claim could hurt future investment and broader investor sentiment.
Perhaps the most notorious tax saga involved Vodafone. After acquiring Indian assets from Hutchison Whampoa in 2007, Vodafone faced a $2 billion tax demand that triggered years of litigation. Although India’s top court initially ruled in Vodafone’s favor, a retrospective change in the law revived the claim and pushed the dispute into international arbitration. Vodafone ultimately won that arbitration in 2020.
Energy companies have not been spared. Cairn Energy faced a tax demand exceeding $1.4 billion linked to an internal reorganization in 2007. After a decade of conflict, India agreed in 2021 to settle the dispute and refund the amount. In the consumer goods sector, Pernod Ricard has been locked in a long-running battle over alleged undervaluation of liquor imports, with authorities seeking roughly $250 million in back taxes. The company has warned that the unresolved dispute has weighed on new investment.
More recently, Chinese automaker BYD has come under investigation for allegedly underpaying duties on imported car parts. Although BYD deposited the initial amount demanded, the probe remains open and could lead to further penalties.
Together, these cases underscore a persistent tension in India’s tax environment. While the country remains an attractive market for global firms, the scale and duration of its tax disputes continue to shape how foreign investors assess legal risk when committing capital.
