India's telecoms given ten years to pay $22bn in back taxes they've already disputed for a decade
Vodafone's Indian outpost has a $10bn bill all by itself and may struggle to pay
India's supreme court has given the nation's telcos a decade to pay billions of dollars in back taxes.
The case dates back to 1999, when India introduced a taxation model that required the country's telecoms companies to share a percentage of revenues with the nation's government. A decade-long dispute over how that sum should be calculated ensued, which rather made a mockery of the initial three-month payment deadline.
Now the court has decided [PDF] that carriers including Vodafone's struggling Indian venture have a decade to pay back billions in retrospective license fees and penalties.
The decision wraps things up after the Court's 2019 decision to support the government's definition of the tax calculations and ordered that Indian telecoms companies in operation since 2003 pay a collective $13bn in retrospective levies and penalties.
A bill of that size is never welcome but it was especially hard to bear for Indian carriers as they fought a price war with upstart Reliance Jio.
Because Jio, which has since become India's largest mobile operator, was only three years old when the court case began, it only owned $2m in retrospective fees and has already paid. Older rivals Bharti Airtel and Vodafone Idea have bills of $3bn and $7bn respectively.
The ruling was especially dangerous to Vodafone Idea, which was already sitting on about $14bn in net debt. The company has warned that the ruling threatens its survival. Vodafone Group and local partner Aditya Birla Group have effectively ruled out a fresh infusion of capital, leaving the company with few options.
The company's struggles have become seen as a symbol for the dangers of dealing with India's government. Its parent company, Vodafone Group, ploughed more than $7bn into its Indian entity in 2016, one of the country's biggest foreign investments.
The new ruling, which came in response to an appeal by the Indian government's telecoms department, will give Vodafone and other carriers much-needed breathing room. In February, the supreme court rejected a petition from a group of telcos to defer payments, berating them for not settling the fees sooner and threatening company directors with contempt.
Nonetheless, the new ruling is slightly disappointing to Vodafone group, as it preferred a 15-year repayment period and India's government proposed a 20 year pay-down period.
The tax will be welcome whenever it lands because India's economy contracted by 23.9 per cent in the quarter ended June 30th as a result of lockdowns implemented to control the COVID-19 pandemic. The disease is nonetheless having a horrible impact in the country, with more than 60,000 deaths and three million infections to date. ®