Struggling telecom operator Vodafone Idea Ltd. (VIL) has been hit with a significant tax setback after receiving a penalty order amounting to nearly Rs. 638 crore from the Office of the Additional Commissioner, Central Goods and Services Tax (CGST), Ahmedabad. The order alleges short payment of GST and wrongful availment of input tax credit (ITC).
The company disclosed the development in a regulatory filing on Thursday, stating that it strongly contests the findings and intends to challenge the order through appropriate legal channels.
According to the filing, the order has been passed under Section 74 of the CGST Act, 2017, which deals with tax evasion involving fraud, wilful misstatement or suppression of facts. The total demand of ₹6,37,90,68,254 includes the principal tax amount, applicable interest, and penalty.
“The maximum financial exposure is limited to the tax demand, interest, and penalty imposed. The company does not agree with the order and will pursue suitable legal remedies,” Vodafone Idea said in its statement.
GST Blow Comes Amid Crucial Government Lifeline
The GST penalty comes at a time when Vodafone Idea has received substantial relief from the Union Cabinet in relation to its long-pending Adjusted Gross Revenue (AGR) dues, a move seen as critical for the company’s survival and for maintaining competition in India’s telecom sector.
Under the Cabinet-approved relief framework, Vodafone Idea’s AGR liabilities have been capped at ₹87,695 crore, and the company has been granted a five-year moratorium on payments. As per the revised timeline, VIL will begin paying the dues only from FY 2031-32, with the final instalment due by FY 2040-41.
In addition, the government will undertake a fresh verification of AGR dues based on the Deduction Verification Guidelines, 2020. A government-appointed committee will reassess the claims, and its decision will be binding on both parties.
Limited Near-Term Cash Outflow on AGR
As part of the relief package, AGR dues relating to FY 2017-18 and FY 2018-19, which were finalised following the Supreme Court’s 2020 ruling, will be paid over a six-year period between FY 2025-26 and FY 2030-31. Sources indicated that this translates to an annual outgo of around ₹120 crore, or approximately ₹700–800 crore in total over the period.
AGR dues are payments made by telecom operators to the government based on adjusted gross revenue and form the basis for licence fees and spectrum usage charges.
Financial Stress Remains Acute
Despite the government’s intervention, Vodafone Idea continues to face severe financial stress. The company reported a net loss of ₹12,132 crore during the first half of the current financial year. As of September 30, its net worth stood at a negative ₹82,460 crore, while total debt had surged to ₹2.02 lakh crore.
In a bid to shore up finances, Vodafone Idea’s subsidiary VITIL recently raised ₹3,300 crore through a non-convertible debenture (NCD) issue. The funds are expected to be used for capital expenditure and network-related investments.
Promoter Support From Vodafone Group
Further relief is expected from the Vodafone Group under a revised liability settlement arrangement. The UK-based promoter has committed to providing ₹5,836 crore to Vodafone Idea. This includes a planned release of ₹2,307 crore over the next 12 months.
Additionally, shares worth ₹3,529 crore, currently held by the Vodafone Group in VIL, have been earmarked for monetisation. Vodafone Idea has the right to direct the sale of these shares, with the proceeds flowing directly to the company.
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