Vodafone Group has complained there is “a complete disconnect between [India’s] government and the tax department” after being served an INR142 billion ($2.03 billion) tax notice for its long-running dispute that is still under arbitration.
The day after it issued a reminder for the outstanding capital gains tax, with a threat to seize assets on non-payment, the Income-Tax Department attempted to downplay the notice, noting it was “part of a normal process”, the Economic Times reported.
Vodafone, which confirmed it received the notice on 4 February, said the tax dispute is currently the subject of international arbitration, so it was surprised by the notice.
“In a week when Prime Minister Modi is promoting a tax-friendly environment for foreign investors, this seems a complete disconnect between government and the tax department,” a Vodafone representative said.
Vodafone India, the second largest operator in India with a 19 per cent market share, has repeatedly clashed with Indian tax authorities since it acquired a 67 per cent stake in Hutchison Essar (owned by Hutchison Whampoa) in 2007 for $11 billion. Vodafone has long claimed it doesn’t owe the government tax because the transaction was conducted offshore.
India’s Supreme Court ruled in 2012 that Vodafone was not liable for paying tax on the acquisition, but the government later changed the law to enable it to tax such deals retrospectively.
The INR142 billion capital gains dispute is the largest of three outstanding tax cases Vodafone is fighting in India.