Indian Government to pay ₹ 20,000 Crore to Vodafone over Tax Arbitration Case

On Friday telecommunication giant Vodafone won the Tax Arbitration Case against the Indian government in an international court. Vodafone had claimed that the government had charged the company over ₹ 20,000 crores in “unfair” dues. Vodafone had first initiated the arbitration proceedings against India in April 2014.

According to Reuters, the international arbitration tribunal in The Hague ruled that the Indian government’s imposition of tax liability on Vodafone is in breach of the investment treaty agreement between India and the Netherlands. Additionally, the tribunal stated that the government should also pay the company over ₹ 40 crores as compensation for its legal costs. 

The tax dispute consisted of ₹ 12,000 crores in interest and ₹ 7,900 crores in penalties. It initiated after Vodafone acquired the Indian mobile assets from Hutchison Whampoa in 2007. Telecom companies in India have to pay the Department of Telecom nearly 3-5 percent of their adjusted gross revenue (AGR) as usage charges for airwaves while 8 percent of it as the license fees.

Despite the continuous dispute between the apex court of India had upheld the government’s view that the AGR should include all revenue. Additionally, in a different case, the Supreme Court had recently passed a verdict allowing the heavily indebted telecoms to settle thousands of crores of government dues in the next 10 years.

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