Why the Supreme Court’s Tiger Global verdict matters: It may make foreign investors reprice their risks

While the judgement is fact-specific, its reasoning dismantles the comfort investors drew from treaty residency, grandfathering assurances and carefully structured exits. It resets India’s investment jurisprudence, with ramifications for private equity (PE), venture capital (VC), foreign portfolio investors (FPIs) and long-term strategic capital.

The most immediate consequence of the ruling is for pre-2017-18 PE, VC and foreign direct investments, particularly those routed through Mauritius. For years, such structures relied on tax residency certificates, board resolutions and governance frameworks to demonstrate control outside India. The Supreme Court has made it clear that paper compliance is no longer enough.

Most Mauritius special purpose vehicles (SPVs) were post-box entities by design, with structures ‘expert-engineered’ to satisfy India’s tax treaty with Mauritius in form—periodic board meetings, internal approvals and decision-making records—without much real operational or commercial substance. This model may now fail, unless investors can demonstrate genuine economic substance and decision-making at the treaty jurisdiction level.

It would be incorrect to claim that all pre-2017-18 exits are automatically taxable. But it is undeniable that tax certainty, the very promise on which those investments were made, has been severely weakened. For post-2017-18 investments, the ruling strengthens the application of General Anti Avoidance Rules (GAAR) across asset classes.

While capital gains on shares are already taxable, treaty benefits claimed on futures and options, debt, dividends and interest are now vulnerable to challenge. This scrutiny will not be confined to investments from Mauritius or Singapore. Structures that lack substance under treaties with jurisdictions like France may also come under the scanner.

It also casts a long shadow over GIFT City structures by raising difficult questions for FPIs and funds claiming exemptions while maintaining a minimal on-ground presence with real control residing offshore.

An open question is whether FPIs in GIFT City, traditionally shielded from GAAR under Rule 10U, would remain protected if courts apply substance-over-form principles independent of formal GAAR invocation. If ‘brain and control’ is now the decisive test, judicially reinforced by GAAR adoption, then many GIFT City models will need re-evaluation.

While the Supreme Court has not authorized a wholesale reopening of past tax assessments, the ruling vastly strengthens the tax department’s hand in reassessment proceedings. For transactions still within the reopening window, it may now cite “information suggesting escapement of income" to evaluate cases.

For cases currently under scrutiny or pending at any appellate level, the ruling is likely to be invoked aggressively. For concluded matters, the tax department may be tempted to attempt appeals with applications for ‘condonation of delay,’ particularly in high-value cases.

It may also explore rectifications based on Circular No. 68 of 17 November 1971, which is not subject to any limitation period and does not require an assessment to be reopened, but allows an earlier decision to be treated as a “mistake apparent from the record" if it is inconsistent with a subsequent Supreme Court ruling.

More than retrospective taxation, the cumulative effect will be a broad litigation overhang. Even where case reopening ultimately fails, the process would inject uncertainty into investors’ exit plans.

Many investors relied on tax insurance to ringfence their exposure on legacy exits, supported by detailed tax opinions from leading firms. That comfort now looks fragile. In response to the Tiger Global ruling, insurers are likely to tighten exclusions, reprice premiums and increasingly contest coverage where GAAR is invoked.

In practice, tax insurance may offer little protection once a structure is judicially characterized as impermissible avoidance. The cost of exits is set to rise, which warrants a re-examination of policy terms.

Perhaps the ruling’s worst consequence lies beyond tax law—in policy credibility. When GAAR was introduced, India’s then finance minister Arun Jaitley had assured Parliament that it would apply prospectively and new rules would not cover investments made up to 31 March 2017. The Central Board of Direct Taxes reinforced this position through circulars.

The ruling, regardless of its legal reasoning, goes directly against those commitments. For foreign investors, this raises a question: If explicit sovereign assurances can be diluted by subsequent interpretation, how should long-term risk be priced in India?

From a policy perspective, the judgement aligns India with global anti-avoidance norms and curbs treaty-shopping. Capital markets, however, respond to predictability. By upsetting settled expectations, the ruling risks being seen not as a reform, but as a source of retroactive uncertainty.

Sure, foreign capital will adapt. Structures will change. Substance will move. But unless this judicial shift is accompanied by clear prospective guidance and renewed assurances, India risks paying a price—in terms of capital repricing. This could shape where global investors choose to deploy their next dollar.

The author is head of tax at BTG Advaya, a law firm.