Late last year, when India moved up to the 100th spot in the global rankings of ease of doing business, Finance Minister Arun Jaitley was quick on the draw and said that even the 50th spot is achievable. The reports of the Department of Telecom (DoT) asking for Rs 4,700 crore from Vodafone India on account of one-time spectrum charges (OTSC) dues are expected to hurt India’s ambitions. Given the size of the Idea-Vodafone deal – $23 billion – and the brand recall of Vodafone globally, it might hurt India’s image in the eyes of international investors.
The decision, as reports suggest, is expected to delay the impending merger of Vodafone India and Idea Cellular beyond June 30, a deadline which has been set by the two entities to conclude the deal.
OTSC was introduced in 2013, around the time telecom spectrum was liberalised. The OTSC was levied, retrospectively and prospectively, on airwaves sold under the administrative regime, which is the method adopted by DoT prior to the current way of auctioning the spectrum. The telcos are contesting the decision in the apex court.
In some ways, the 2G case turned out to be “bad lodestar” for taxmen and regulatory authorities in India. It created an atmosphere where every deal or business decision was looked at with suspicion.
A slew of cases – which are classified by some as tax terrorism – are pending before various arbitration courts, including Rs 10,247-crore Cairn tax dispute and Rs 22,100-crore Vodafone tax case. Royal Dutch Shell Plc and Nokia Corp were lucky to settle their mega tax rows in a short span of time. Last year Jaitley termed the tax demand from Vodafone as an erroneous decision, though the British telco is still fighting the case tooth and nail. For Vodafone, it’s possibly the second instance of getting caught in the regulatory cobweb.
