Vodafone begins arbitration against India in tax dispute

Vodafone Group Plc has begun an international arbitration against the government in a more than Rs 20,000 crore tax case, toughening its stance in a long-running dispute that has dented foreign investor sentiment.

British telecom giant Vodafone has served an arbitration notice on the Indian government over its Rs 20,000-crore tax dispute.

"Vodafone confirms that Vodafone International Holdings BV has commenced an international investment arbitration against the Indian government under the Bilateral Investment Treaty (BIT) between India and the Netherlands," the company said in an email response to HT.

It has given two months time for a response, which means the new government will have to take a call on the arbitration demand.

Vodafone is locked in twin tax disputes with the government. One pertains to its 2007 acquisition of Hutchison Essar’s mobile assets and the other is the transfer-pricing case involving Vodafone India Services.

In 2012, the Supreme Court ruled in favour of Vodafone, saying the company was not liable to pay any tax on the deal. The government later made changes to retrospective tax rules, enabling it to tax already-concluded deals.

"Since Vodafone and the Indian government have been unable to find an amicable means of resolving the dispute, Vodafone has commenced an international investment arbitration as a way to achieve resolution," a company spokesperson said.

Earlier this year, the finance ministry circulated a draft Cabinet note seeking to withdraw the conciliation talks on the tax dispute.