Tax tussle: Cabinet to consider finmin proposal to call off talks with Vodafone

Written by fe Bureau | New Delhi | Updated: Feb 27 2014, 23:53pm hrs
VodafoneThe Cabinet will consider the finance ministry?s proposal to call off the conciliation talks... (Ap)
The Cabinet will consider the finance ministrys proposal to call off the conciliation talks with UK-based Vodafone relating to the Rs 20,000-crore tax dispute over the companys acquisition of Hutchisons 67% stake in Hutch-Essar in 2007 this Friday.

The Cabinet will also consider a fertiliser ministry proposal for modified New Pricing Scheme-III, under which the fixed cost of urea produced by plants that are 30 years old or more would be increased by Rs 150 per tonne, while for all other plants it would be raised by Rs 350 per tonne.

The seventh central pay commission and the release of additional installment of dearness allowance to central government employees and pensioners due from January 1, 2014 are also on the agenda of Friday's meeting.

In 2012-13, the government had amended the law invalidating a Supreme Court judgment and tax Vodafone on its acquisition of Hutchison Whampoa's stake in Hutchison Essar.

As the move drew a lot of criticism, the finance ministry agreed to Vodafone's conciliation proposal. While the basic tax demand for the 2007 acquisition is Rs 7,990 crore, the outstanding dues, including a penalty of a similar amount and accrued interest, run into Rs 20,000 crore.

The ministry, however, opted to withdraw conciliation talks with Vodafone International Holdings BV after the company served a supplementary notice last month to the government under the Bilateral Investment Promotion and Protection Agreement (BIPA) over the tax dispute.

On Friday, the waiver of unpaid portion along with the interest of notional loan of Rs 7,500 crore given to BSNL as part of its capital structure at the time of its formation will also be considered.

Besides, the Cabinet will also take up a proposal for amendments to the new investment policy in the urea sector and the continuation of additional compensation to Fertiliser and Chemicals Travancore (FACT).