Sitharaman said the rules that will lead to the scrapping of the retrospective tax demands made on companies like Cairn and Vodafone would be framed soon.

Mumbai: Vodafone Group is planning to settle the dispute over the retrospective application of the tax on the transfer of assets; following the Indian government moves to scrap the provision, four people close to the development told ET.

This could end the decade-old tax dispute between the British telecom company and the Indian government.

According to the people cited above, Vodafone will apply to the Indian government after the framework for settling such disputes is announced in the coming weeks. A Vodafone spokesperson declined to comment.

India recently introduced a bill to ax the retrospective tax amendment introduced in 2012. The government has also promised to refund taxes already collected and withdraw all litigation and arbitration. In return, companies have to undertake an undertaking to withdraw litigation in all forums and forgo any damages, interest, or other costs.

Time for resolution

“The company would wholeheartedly accept this if it’s as promising as the government is claiming it to be,” said a person close to Vodafone.

“The bill talks about certain conditions and undertakings, and the company will have to look into it,” another person close to the company said. “If these conditions are comfortable, then there should be no difficulty in complying. It’s high time the tax disputes are resolved.”

As things stand, the Indian government has to withdraw the petition is filed in the Singapore High Court for the Vodafone dispute to an end, tax experts said.

About 17 companies are impacted by the indirect transfer of assets provision, including Vodafone, Cairn, and WNS. Experts said companies would wait for the precise details on approaching the government to end the dispute.

“The government is yet to prescribe the rules around the withdrawal of indirect transfer of asset litigation, and that should also have the procedure of how companies can go about it,” said Dinesh Kanabar, chief executive of Dhruva Advisors, a tax advisory firm. “No company would want to continue litigation, especially with a sovereign, and in most cases, they would like to move on with life and business.”

Finance Minister Nirmala Sitharaman on Monday said officials from her ministry are in discussions with Cairn Energy Plc and Vodafone Plc on the closure of retrospective tax cases, refund, and settlement.
 
Earlier this month, Parliament passed a bill to scrap all tax demands made using the 2012 retrospective tax legislations. The bill provides for the government refunding the retro tax to companies, provided all legal challenges are withdrawn.
 

Sitharaman said the rules that will lead to the scrapping of the retrospective tax demands made on companies like Cairn and Vodafone would be framed soon.
 
However, the finance minister said she herself had not had any discussions with the companies on the issue of retrospective tax and the closure of cases.
 
Also Read: Govt expects retail inflation to remain contained going ahead: Nirmala Sitharaman.

On inflation, the finance minister said she expects it to remain contained within the central bank's range of 4(+/- 2) percent in the coming months but ruled out any cut in excise duty for petrol and diesel, which are selling at all-time high prices.
 
Sitharaman said the Centre is paying through its nose on oil bonds of the UPA era. She called the oil bonds "trickery" of the UPA government, acting as an "unfair burden.

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The previous Congress-led UPA government at the Centre had issued bonds to state-owned oil companies to make up for the difference in the artificially suppressed retail selling price of fuel and the cost. These oil bonds and the interest thereon are being paid now.
 
"If I did not have the burden to service Rs 1,34,423 crore of oil bonds issued by the UPA, I would have also been able to reduce fuel prices," Sitharaman said. The NDA government paid nearly Rs 70,196 crore interest between FY15-21. "Current principal outstanding on the UPA era oil bonds is Rs 1,30,923 crore," she said.