With the government retrospectively changing the law allowing it to tax indirect transfers of Indian assets through deals struck overseas, Vodafone faces the prospect of paying nearly three times the initial tax demand of Rs 79 billion.
This is after the Lok Sabha passed the finance bill which reportedly includes a validation clause enabling the government to revive earlier demands.
In Vodafone?s case, this includes the tax authorities? original demand of Rs 79 billion since it did not withhold that amount while purchasing the Indian telecom assets of Hutchison, and a penalty of an equal amount and interest of close to Rs 40 billion on the original tax.
Meanwhile, Vodafone has expressed its concerns on this issue. It has described the government?s actions as ?grossly unjust? citing that in their case Hutch was the seller. It said it was ?studying the legislation? to take necessary steps to safeguard the interest of its shareholders.
The government has argued that Vodafone ought to have withheld tax and has repeatedly asserted that it had told both Hutchison and Vodafone its intention to tax the transaction in 2007. Vodafone disputes this, saying it had not received any notice from the government.
