on the deal despite an apex court ruling in its favour.
The other option is the investment-hungry government stating in the forthcoming Budget that it will be withdrawing the retrospective amendment provision – on the lines of the reported suggestion by the Shome panel – and ensuring that Vodafone does not have to pay tax. However, the government’s need to reduce the fiscal deficit to avoid a possible downgrade by rating agencies may not allow it to close any route to raise more revenues.
According to tax experts, finance minister P Chidambaram’s statement on Monday on general anti-avoidance rules did not provide clarity on how he intends to define tax policies in Vodafone-type deals involving transfer of underlying Indian assets.
The government is yet to release the final recommendations of the Shome panel on indirect transfers. The Shome panel has reportedly favoured only prospective application of tax law in such cases. It had also recommended the waiver of interest and penalty if the government chooses to retrospectively apply norms.
Releasing Vodafone’s sustainability report 2012 earlier in the day, Sibal, referring to several issues facing the telecom sector including the forthcoming spectrum auction norms, said: “I can assure Marten Pieters (Vodafone India MD and CEO) and other telecom operators that the government is very, very, very serious about the concerns they have expressed and I can give an assurance today that 2013 will be a different year for the telecom sector.” To this, Pieters said: “I am glad that he gave us some hope. Now that hope needs to translate into action.”