Tax
The rule gave officials the power to go after M&A deals all the way back to 1962 if the underlying asset was in India. Image Credit: Pixabay

New Delhi: India is in talks with Vodafone and Cairn Energy to settle long-running tax disputes with them, a top government official said after the nation last week moved to abolish a rule on retrospective taxation.

"There are some informal discussions going on," said Tarun Bajaj, Revenue Secretary in an interview with Bloomberg Television. "I would not like to discuss them in public domain, but overall the answer to your question is, yes," he said when asked if the companies were willing to drop cases in international tribunals.

Dropping pending litigation or forgoing any interest or costs is the first step for companies to become eligible for exemption from the tax rule, which was introduced in 2012. The rule gave officials the power to go after M&A deals all the way back to 1962 if the underlying asset was in India.

Besides opening room to settle disputes with Vodafone and Cairn, the move aims to support economic recovery by attracting investment.

The litigants would find changes to the tax law useful, Finance Minister Nirmala Sitharaman said in Parliament. "I'm sure this will be appealing enough, and putting an end to this ghost which we have been carrying all this while from 2012," she told lawmakers.

Still, the retrospective taxation wasn't the only challenge facing companies in India.

The Vodafone arbitration

Vodafone Idea, a joint venture between Vodafone Group and Indian billionaire Kumar Mangalam Birla's conglomerate, faces billions of dollars in back fees to the government. The company suffered a setback recently when the nation's top court rejected petitions by telecom operators to reassess their dues.