Voda Idea gets Rs 638-cr GST penalty order; firm disagrees with order, to take legal action

New Delhi, Jan 1 (PTI) Telecom operator Vodafone Idea (VIL) on Thursday said it has received about Rs 638-crore GST penalty order from the Office of Additional Commissioner, Central Goods and Service Tax, Ahmedabad.

In a statutory filing, Vodafone Idea said it disagrees with the order and will take legal action against it.

The filing comes just a day after debt-laden telco received a major relief on its Adjusted Gross Revenue dues, with the Union Cabinet on Wednesday deciding to freeze its dues along with a 5-year payment moratorium and allowing the telco's capped AGR dues to be reassessed.

In a BSE filing on Thursday, VIL informed about the "Order passed under Section 74 of the Central Goods and Services Tax Act, 2017 confirming penalty of Rs 6,37,90,68,254 along with the demand and interest as applicable".

The order came from the Office of the Additional Commissioner, Central Goods & Service Tax, Ahmedabad and was received on Wednesday, VIL said, adding that it pertains to the "allegation of short payment of Tax and excess availment of Input Tax Credit".

"The maximum financial impact is to the extent of tax demand, interest and penalty levied. The company does not agree with the order and will take appropriate legal action(s) against the same," Vodafone Idea said.

The GST order came a day after the government on Wednesday approved a major relief package for Vodafone Idea, freezing its outstanding AGR dues, approving a five-year moratorium on payment, and clearing the way for reassessment of the capped statutory charge, giving a critical lifeline to the beleaguered telco.

The relief measures approved by the Union Cabinet aim to protect the interest of the government (which has about 48.9 per cent stake in the telco), enable orderly payment of dues to the Centre by way of spectrum auction charges and AGR dues, ensure competition in the sector and safeguard the interests of 20 crore consumers of Vodafone Idea, according to sources.

According to the Cabinet decision, the AGR dues of Vodafone Idea have been frozen at Rs 87,695 crore, which the struggling company now has to start paying from the 2031-32 fiscal and clear by 2040-41, according to sources aware of the decision.

The frozen dues will be reassessed by the telecom department based on the 'deduction verification guidelines' of 2020 and audit reports, and the outcome will be decided by a government-appointed committee and be binding on both parties.

AGR dues refer to payments owed by telecom companies to the government based on Adjusted Gross Revenue. It is the revenue on which telecom operators must pay licence fees and spectrum usage charges.

According to the relief package, AGR dues for FY 2017-18 and FY 2018-19, which were finalised based on the Supreme Court order of September 2020, will now have to be paid over 2025-26 to 2030-31 fiscal years without any change, they said.

Sources said this amount works out to roughly Rs 120 crore per annum and between Rs 700 and Rs 800 crore over six years.

Vodafone Idea has been battling a prolonged financial crisis, driven by intense price competition, high debt, and massive AGR liabilities that arose from a change in the definition of AGR. The company has struggled with persistent losses, a shrinking subscriber base, and limited ability to invest in network expansion, even as rivals accelerated 4G and 5G roll-outs.

Repeated rounds of government relief and equity conversion of dues have kept the company afloat, but its long-term viability continues to hinge on sustained policy support, fresh capital infusion, and a turnaround in operating performance.

Some had expected that the Cabinet would waive a part, if not all, of the AGR dues immediately. But instead, it decided to give a moratorium on the bulk of the dues, with reassessment in the offing, giving the beleaguered company a shot at stabilising its operations.

According to sources, the government remains firmly committed to supporting the sector, ensuring financial stability and preserving healthy sectoral competition for the benefit of customers.

The sector is also highly concentrated, and the government would, in the interest of consumers and competition, like to have multiple players in such critical sectors; therefore, the survival of VIL as a viable player is important.

The move comes in the backdrop of a favourable order VIL got from the Supreme Court, which allowed the government to reconsider and take an appropriate decision with reference to the additional AGR demand raised for the period up to the financial year 2016-2017, and of comprehensively reassessing and reconciling all AGR (adjusted gross revenue) dues, including interest and penalty.

Vodafone Idea incurred a loss of Rs 12,132 crore in the first half of the current fiscal, and its net worth stood at negative Rs 82,460 crore as of September 30. The total debt of the company stood at Rs 2.02 lakh crore at the end of the reported quarter.

Earlier this month, Vodafone Idea informed that its subsidiary VITIL has completed a Rs 3,300-crore fundraise by way of issuing non-convertible debentures. The proceeds, it had said, will be used by VITIL to repay its payment obligation to Vodafone Idea, enabling it to bolster its capex and support business growth.

In a BSE filing on Wednesday evening, Vodafone Idea said it will receive around Rs 5,836 crore from Vodafone Group as part re-settlement of a liability claim pact between the two companies. Under the revised agreement, Vodafone group promoters will release Rs 2,307 crore over the next 12 months for Vodafone Idea as per the terms agreed in the amendment agreement.

Vodafone Group has also set aside its 328 crore shares held in VIL for the benefit of the Indian telco.

VIL will have the right to instruct Vodafone to sell these shares, in one or more tranches, with any cash proceeds being transferred to Voda Idea.

As on the date of the amendment agreement, the market value of the earmarked shares stands at Rs 3,529 crore, the filing on Wednesday said. PTI MBI HVA