Telecom operator Vodafone Idea on Thursday said it has received a GST penalty order of about Rs 638 crore from the Office of the Additional Commissioner, Central Goods and Service Tax, Ahmedabad, a development that comes a day after the debt-laden telco secured major relief on its Adjusted Gross Revenue dues from the Union Cabinet.
In a statutory filing, Vodafone Idea said it disagrees with the order and will take legal action against it.
In a separate BSE filing on Thursday, the company 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, received on Wednesday pertains to the “allegation of short payment of Tax and excess availment of Input Tax Credit”, the company said.
“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 in the filing.
The GST penalty order came a day after the government approved a major relief package for Vodafone Idea.
On Wednesday, the Union Cabinet decided to freeze the telco’s outstanding AGR dues, grant a five-year moratorium on payment, and allow reassessment of the capped statutory charge, offering a critical lifeline to the beleaguered company.
According to sources, the relief measures aim to protect the interest of the government, which holds about a 48.9 per cent stake in Vodafone Idea, enable orderly payment of dues to the Centre by way of spectrum auction charges and AGR dues, ensure competition in the telecom sector, and safeguard the interests of 20 crore Vodafone Idea consumers.
Under the Cabinet decision, Vodafone Idea’s AGR dues have been frozen at Rs 87,695 crore. The company will begin paying these dues from the 2031-32 financial year and clear them by 2040-41, sources aware of the decision said. The frozen dues will be reassessed by the telecom department based on the deduction verification guidelines of 2020 and audit reports. The outcome will be decided by a government-appointed committee and will be binding on both parties.
AGR dues refer to payments owed by telecom companies to the government based on Adjusted Gross Revenue, 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 be paid over the 2025-26 to 2030-31 financial years without any change.
Sources said this amount works out to roughly Rs 120 crore per annum and between Rs 700 crore and Rs 800 crore over six years.
Vodafone Idea has been grappling with 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 observers had expected the Cabinet to waive a part, if not all, of the AGR dues immediately.
Instead, it opted for a moratorium on the bulk of the dues along with reassessment, giving the company an opportunity to stabilise operations.
Sources said the government remains committed to supporting the telecom sector, ensuring financial stability, and preserving healthy competition for the benefit of customers.
With the sector being highly concentrated, the government is keen on having multiple players in such a critical industry, making the survival of Vodafone Idea as a viable operator important.
The Cabinet decision followed a favourable order for Vodafone Idea from the Supreme Court, which allowed the government to reconsider and take an appropriate decision on the additional AGR demand raised for the period up to FY 2016-17 and to comprehensively reassess and reconcile all AGR dues, including interest and penalty.
Vodafone Idea reported a loss of Rs 12,132 crore in the first half of the current financial year.
Its net worth stood at a negative Rs 82,460 crore as of September 30, while total debt was at Rs 2.02 lakh crore at the end of the reported quarter.
Earlier this month, the company said its subsidiary VITIL had completed a Rs 3,300-crore fundraise through the issuance of non-convertible debentures.
The proceeds will be used by VITIL to repay its payment obligation to Vodafone Idea, enabling the parent to bolster capital expenditure and support business growth.
In another 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 to Vodafone Idea as per the amended terms.
Vodafone Group has also set aside its 328 crore shares held in Vodafone Idea for the benefit of the Indian telco.
Vodafone Idea will have the right to instruct Vodafone to sell these shares, in one or more tranches, with any cash proceeds being transferred to Vodafone Idea.
As on the date of the amendment agreement, the market value of the earmarked shares stood at Rs 3,529 crore, the filing said.