Indian Court ruling delivers a blow to Mauritius as an investment gateway

A far-reaching ruling by India’s Supreme Court has dealt a fresh blow to Mauritius’ position as a conduit for foreign capital entering India. In a precedent-setting verdict, the apex court ruled that US investment firm Tiger Global is liable for capital gains tax on its US$1.6bn sale of shares in Flipkart, the Indian ecommerce group, to Walmart in 2018 – a stake it had purchased through Mauritius-based entities.

The court examined whether Tiger Global could claim a tax exemption under the India-Mauritius Double Taxation Avoidance Agreement (DTAA), or if the Mauritius companies acted merely as ‘front entities’ ultimately controlled from the US. Although a 2017 amendment to the DTAA granted India the right to tax such transactions, it explicitly exempted investments made before the change took effect. The Delhi High Court had previously upheld Tiger’s view that this provision shielded the deal from Indian levies.

The Supreme Court ruled that because the Mauritius entity lacked ‘commercial substance’, it could not access these treaty benefits – effectively bypassing exemption for pre-2017 investments. In other words, the Court concluded that Tiger Global was set up in Mauritius with the aim of avoiding taxes and did not have any commercial interest in the island other than acting as a tax avoidance vehicle. While Tiger Global’s precise liability remains unclear, estimates suggest the combined tax and penalties could approach US$1.5bn.

In 1982, India and Mauritius signed a DTAA, allowing investors from either country to operate in the other without incurring double taxation on the same income. Mauritius does not levy capital gains tax and maintains a corporate income tax rate of 15%. In contrast, India’s capital gains tax begins at 12.5%, while most companies pay at least 25% corporate tax. The DTAA enabled investors to avoid taxes by routing capital through Mauritian entities - a practice commonly referred to as ‘round tripping’. So widespread was this practice that between 2000 and 2023, Mauritius officially became the largest source of ‘foreign’ investments contributing a cumulative US$171bn to India. In reality it was Indian capital being rerouted back into India using Mauritius as a tax haven.

Seeking to plug the resulting revenue leak, India revised the treaty in 2016. The amendment granted New Delhi the right to tax capital gains on Indian shares effective from April 2017. Crucially, the deal included a "grandfathering" clause exempting investments made before that date – the very provision Tiger Global had relied upon for its defence.

The ruling could negatively impact Mauritius’ financial services sector, which facilitates these investment flows into India. The industry is a pillar of the island’s economy, accounting for a quarter of GDP directly and indirectly. The decision is particularly sensitive for the Global Business Licence segment – the framework for companies incorporated in Mauritius that conduct business principally abroad. These entities contributed more than 68% of the country's total corporate tax revenue in the financial year ending 2025.

The shockwaves from the ruling are also expected to reach Singapore, which rivals Mauritius as a top source of foreign direct investment into India. Historically, the tax agreement between India and Singapore was explicitly tied to the Mauritius deal. The two treaties were linked so that the capital gains exemptions available to Singaporean investors depended on those same benefits remaining valid for Mauritius. However, the Supreme Court’s new precedent puts these Singaporean structures in immediate jeopardy. If tax authorities determine that a Singapore-based entity is merely a shell – lacking independent decision-making power, local employees, or genuine business operations – it could be denied treaty benefits entirely. This would render even older, "grandfathered" investments liable for Indian taxes, creating profound uncertainty for the billions of dollars in private equity and venture capital assets routed through the city-state.

 

References

‘Amendments to the India/Mauritius treaty’, Simmons & Simmons, 13 May 2016

‘Why an India-Mauritius tax amendment triggered a stock market slide’, Finshots, 18 April 2024

'Budget 2024: Tax on all long-term capital gains increased to 12.5 per cent from 10 per cent', NDTV, 23 July 2024

'Mauritius unveils ambitious five-year strategy for financial services sector', Sovereign Group, 10 June 2025

'India’s landmark tax ruling investments via Mauritius rattles global investors', Reuters, 16 January 2026

'Tiger Global liable for capital gains tax in India, Supreme Court rules', Financial Times, 16 January 2026

'India court ruling on Mauritius investment route unsettles foreign investors', Arbitration Monitor, 19 January 2026

'How Supreme Court’s Tiger Global ruling may impact investments through Mauritius, Singapore', India Today, 21 January 2026