Vodafone files to settle tax dispute; govt begins returning guarantees

3 Dec 2021

Vodafone Group has filed an application to settle its long-running tax dispute with the Indian government, the Economic Times writes, citing an unnamed senior government official. The settlement is expected to see the government return around INR447 million (USD6 million) to the British group.

As previously reported by CommsUpdate, the development follows the government’s decision earlier this year to reverse the retrospective element of a controversial 2012 amendment to the country’s taxation laws and is part of a wider effort by New Delhi to rehabilitate its reputation with regards to taxation and to strengthen investor confidence.

The dispute concerns Vodafone’s 2007 acquisition of a majority interest in Indian mobile provider Hutchison Essar. The government sought to collect taxes on the transaction but a Supreme Court decision in January 2012 ruled in Vodafone’s favour, prompting the government to introduce new legislation in May that year to ensure that such transactions would be taxable. The government applied the amendment retrospectively, however, enabling it to continue to pursue its case against Vodafone. Following a series of prolonged delay awaiting arbitration on the matter, an international tribunal at The Hague eventually ruled against the Indian government in September 2020, ordering New Delhi to pay the firm USD1.2 billion in damages. The government rejected the ruling and filed an appeal in early 2021.

In a related development, meanwhile, the Indian government has reportedly begun returning bank guarantees to cellcos Vodafone Idea (Vi) and Bharti Airtel. As part of the government’s recent reform efforts to ease the financial and regulatory burden on operators, in September this year the bank guarantee requirement for dues such as licence fees was reduced from 100% to just 20%. As such, a total of INR200 billion is to be released to the duo – INR120 billion to Vi and INR80 billion to Airtel – of which INR60 billion has been released so far (INR35 billion to Airtel, INR25 billion to Vi), according to the report.

India, Bharti Airtel, Vi (Vodafone Idea Limited, VIL), Vodafone Group