Vodafone has liability to pay tax on Hutch deal, says official

Vodafone has liability to pay tax on Hutch deal, says official

New Delhi, 25 September Contesting Vodafone’s view that it had no obligation to pay tax on its deal to buy stake in Hutch-Essar, a senior government official today said the British firm was responsible to submit tax to the government.

“Vodafone is payer in this case. So, it has a liability of payer," G C Srivastava, Director General (International Tax) in the Ministry of Finance, told reporters on the sidelines of an Assocham seminar here.

Liability of payer and payee is different. Vodafone has a liability of payer, Srivastava said, indicating that Vodafone should have deducted tax at source before making payment to Hutchison and deposited it in the kitty of the government.

The Income Tax deparment has sent a notice to Vodafone, seeking around 1.7 billion dollars in capital gains tax related to the sale of Hutchison’s 67% stake in Hutch-Essar, now renamed Vodafone-Essar. However, the company has contested this notice and approached the Bombay High Court.

Last week, Vodafone CEO Arun Sarin, who is also Vice-Chairman of Vodafone-Essar, had said the company was not liable to pay tax.

“We are working with the Income Tax Department to sort this issue. Neither the Essar Group, nor Vodafone, norVodafone Essar is liable to pay taxes. It is the seller who should be taxed; and the seller is not one of the parties represented here," Sarin had said.

In May, Vodafone Group Plc had paid $11.2 billion to HTIL for acquiring controlling stake in Hutchison Essar.