"We will be walking away from the ongoing discussions with Airtel for their platform Airtel Zero," Flipkart said.
Net neutrality implies equal treatment to all Internet traffic and any priority given to an application or company on payment basis is seen as violating the concept.
Launched last week, Airtel Zero is an open-marketing platform that allows customers to access certain mobile applications for free with charges being borne by app makers.
A government-appointed panel is looking into these concerns and is likely to submit its report next month, while the matter is being separately studied by Telecom Regulatory Authority of India (TRAI), which has already got submissions from over one lakh netizens in support of net neutrality in India.
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Free Internet advocates and start-ups see the move as a violation of net neutrality and one that could even "lead to monopolisation by a few and squeezing out of small companies".
"We did look into the zero rating concept and on one hand we felt that being able to make free Internet available could be useful but after looking in deeper we realised that net neutrality can get compromised in the future which we are not supportive of it at all."
He had earlier tweeted in defence of Airtel Zero, saying "When foreign companies do it in India - Innovation. Indians do it - Violation. #NetNeutralityDiscrimination?"