The Centre will soon take a decision on further course of action including considering the option of bringing a new law to withdraw the 2012 amendment to settle its tax dispute with Vodafone after the Permanent Court of Arbitration (PCA) at The Hague ruled in favour of the company.
The court ruled that the conduct of India's tax department is in breach of "fair and equitable" treatment, thereby rendering Vodafone not liable to pay a retrospective tax demand of more than Rs 20,000 crore raised by Indian authorities.
Sources said that the Finance Ministry is taking a detailed view on its tax dispute with Vodafone and is looking at all options including nullifying the tax demand by introducing a law that withdraws the controversial 2012 amendment which made companies liable to pay tax retrospectively even on gains made in concluded deals.
The other options, sources said, is to look at challenging the PCA award in its entirety or confining the challenge to sovereign immunities as claimed by Vodafone Plc under the India-UK Bilateral Investment Protection Agreement (BIPA) and the Netherlands-India Bilateral Investment Treaty (BIT).
Sources said that the government is looking at all options, taking view on which move would be the best course that settles the dispute once and for all, along with limiting the loss to the exchequer, if it is to be incurred. One view is also that case should not be pursued and an out of the court settlement may be explored with telecom giant.
Earlier in September, after the the arbitration award, the Centre said that it will take a decision on further course of action including legal remedies among other options after studying the award and consulting with its counsels after Vodafone won the case against India over a retrospective tax demand of more than Rs 20,000 crore The Permanent Court of Arbitration (PCA) at The Hague.
Vodafone had moved the International Court of Justice (ICJ) in 2016 due to a lack of consensus between the parties' arbitrators in finalising a judge for a tax dispute.
Following this, a tribunal was constituted in June 2016 after Vodafone challenged India's use of a 2012 legislation that gave it powers to retrospectively tax deals like Vodafone's $11 billion acquisition of 67 per cent stake in Hutchison Whampoa in 2007. The retrospective tax law had been enacted after a Supreme Court judgement went in Vodafone's favour.
Vodafone had challenged the tax department's demand of Rs 7,990 crore as capital gains tax (Rs 22,100 crore after including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT).
The tax demand had been raised way back in 2007 by the Income Tax Department. The then UPA government had raised a tax demand of Rs 11,000 crore on Vodafone's $11 billion acquisition of Hutchison Telecom stake.
In May 2018, the Delhi High Court had allowed the second arbitration initiated by Vodafone Plc. under the India-UK Bilateral Investment Protection Agreement in the over Rs 20,000 crore retrospective tax case.
According to official sources, the Indian government may have to pay a total of Rs 85 crore, in case it decides not to take any further legal recourse in the Vodafone arbitration matter of over Rs 20,000 crore retrospective taxation.