Government Says Open to Out of Court Settlement in Vodafone Case

New Delhi: The government on Friday said it is open to an out-of-court settlement with Vodafone and Cairn on tax cases, where the arbitration process has been initiated.

"As far as out of court settlement for Vodafone is concerned we have always said that we are prepared to discuss with friends and colleagues in Vodafone in good faith as to whether it might be possible to get to negotiated settlement we are always open to those discussions," Minister of State for Finance Jayant Sinha said here.

Foreign investors like Vodafone have dragged government to arbitration over a Rs 20,000-crore tax dispute arising out of retrospective applicability of the tax law. British oil explorer Cairn Energy Plc has also initiated a similar move over Rs 10,247 crore tax liability due to the same reason.

The basic tax demand for Vodafone was Rs 7,990 crore but the total outstanding, including interest and penalty, is estimated to have risen to Rs 20,000 crore.

While both the central government and Vodafone have named their arbitrators, they have not yet been able to agree on a third arbitrator to preside over the proceedings.

The case relates to the retrospective amendment of the income tax laws carried out by the UPA government in 2012 to overturn the Supreme Court verdict, which had favoured Vodafone.

Cairn had in April named former Bulgarian minister and lawyer Stanimir A Alexandrov as its arbitrator in the matter.

India on its part has said it would soon appoint an arbitrator in the tax dispute.

Asked if the government is considering out-of-court settlement for Vodafone, Central Board of Direct Taxes Chairperson Anita Kapur said the government is always in the favour of reducing litigation.

"We will have to wait for some developments. The government is always open to reduce litigation dispute by whatever ways it is possible."

Mr Sinha also said that the most comprehensive efforts to reduce litigation are by elimination of exemptions and reducing of corporate tax rates.

"The other thing that we have underway is simplification of the tax code...so whether it is through cleaning up or streamlining exemptions, whether it is simplifying the tax code, we are absolutely trying to reduce the amount of litigation that is in the system right now," he said.

"Our goal is to ensure that our tax system is fair, it's simple, it's predictable... Our endeavour with respect to all these specific cases is that we always we will attempt in all good faith to try and settle them. That remains our consistent principle for these specific cases," he added.

With regard to bankruptcy law, Mr Sinha said the government will try and place it in the winter session of Parliament itself.

"Obviously our first priority is GST, but immediately after the GST we want to work on the bankruptcy code. We will see how Parliament addresses that," he said.

Expectations are that standing committee will take a look at it, he said, adding, "If we can expedite it, we will try and pass it as soon as possible."

On the Goods and Services Tax, Mr Sinha said the government is very well prepared for its implementation.

"We have been preparing it for several years now and all of the work that's necessary on the system side, on the rate side, preparing the field formations, GST council all of that is well in hand and all that we are hoping for is that we can have a good debate on Rajya Sabha on this matter so that we can convince our colleagues across the aisle," he said.

He expressed hope that the government would be able to convince people that this is a very important step for India's reform processes.

The minister said the timeline for passage of the bill is not in hands of the government.

"As far as we can push it, we are pushing it. It is really up to the democratic processes to see how soon they can get it passed," he said.