The Indian government has submitted a request to withdraw from upcoming conciliation talks with Vodafone over its $2 billion tax bill.
The parties were due to meet to resolve the long-running dispute, which relates to Vodafone's 2007 acquisition of Hutchison Essar. After receiving an order to pay $2 billion in taxes on the deal, the U.K.-based telco giant claimed it was not liable for tax because the transaction took place between two holding companies based outside India.
The Indian Supreme Court upheld Vodafone's argument but the government then introduced a law that allowed it to apply taxes retroactively on deals between foreign entities that cause a material change in the ownership structure of Indian companies.
According to Reuters, the finance ministry will seek approval from the cabinet to withdraw from the conciliation talks after Vodafone lobbied to include another dispute concerning a $591 million charge it received in December.
This second bill was issued to Vodafone India Services Private Limited (VISPL), a Pune-based subsidiary providing customer support services to Vodafone's various operating businesses, and relates to transfer share pricing – the practice of setting the fees that divisions within the same company, or subsidiaries owned by the same parent, charge one another for goods and services.
Again, Vodafone claims it is not liable for the bill and a tribunal granted a temporary reprieve in late December.
If the talks break down before they even begin, Vodafone could find itself on the receiving end of yet another tax bill.
"The matter related to Vodafone will be taken to the cabinet, and the cabinet will take a final decision," said Finance Ministry spokesman D.S. Malik, in the Reuters report.