Troubled mobile-phone services provider Vodafone Idea has been given some relief in the form of tax refunds. The Indian Supreme Court on Wednesday ordered the income tax department to refund 7.33 billion rupees (US$97 million) for the assessment year 2014-15.
The case pertains to Vodafone Mobile Services, which later merged with Idea Cellular in 2018 to form Vodafone Idea. Vodafone had sought 47.6 billion rupees ($622 million) in tax refunds for four assessment years – 2014-15, 2015-16, 2016-17 and 2017-18 – but the court granted a refund for only one year.
The court told the tax department to refund the amount within four weeks. It also directed it to conclude as early as possible proceedings relating to the refund demand from the telecom firm and scrutiny of its income with respect to assessment years 2016-17 and 2017-18.
This provides minor relief for the telecom operator, which is struggling to survive amid predatory competition unleashed by a recent entrant – Reliance Jio Infocomm, owned by India’s richest man, Mukesh Ambani. Its launch in 2016 led to the erosion of the subscriber bases of both Vodafone and Idea, which decided to merge and jointly fight the new entrant.
In addition, Vodafone Idea has to pay around 530 billion rupees ($7.45 billion) for its license fee, spectrum usage charge, interest and penalty dues to the telecommunication department. This was the result of a 14-year-old court battle between the telecommunications department and the companies over what should be the scope of adjusted gross revenue.
The telecom companies had argued that only core items should be considered when assessing revenue, whereas the telecommunications department contended that income from non-core items should also be taken into account. The Supreme Court favored the latter, forcing all mobile-phone services to fork out huge sums to the government and Vodofone Idea was slapped with the highest payout.
The dispute arose when telecom companies migrated to a new system offered by the government in 1999, under which operators agreed to share a certain percentage of revenue with the government.
Vodafone Idea had sought a refund of the goods and services tax to the tune of 80 billion rupees (US$1.12 billion) and a more staggered schedule to pay the court-mandated dues. The company has so far paid 13.67 billion rupees as dues to the telecommunications department.
Last week, Vodafone Plc of the UK injected $200 million into its Indian joint venture. Idea promoter Aditya Birla Group had earlier paid 15.3 billion rupees ($203 million).
In the December quarter, Vodafone Idea posted a loss of 508 billion rupees ($6.74 billion), the highest loss in Indian corporate history.