Tata has told the department that the payment was the outcome of arbitration proceedings in a London court and hence GST was not applicable.
“The amount was dues paid by Tata Sons on behalf of Tata Teleservices<\/a> and not for any services rendered to Tata Sons by Docomo<\/a>,” said an executive close to the development. “The group will contest legally all the way.”
Tata Sons did not comment.
The DGGI functions under the Central Board of Indirect Taxes & Customs (CBIC) and is entrusted with the collection, collation and dissemination of intelligence relating to evasion of GST. It used to be the Directorate General of Central Excise Intelligence (DGCEI). GST has been levied under Schedule 2 of the CGST Act, which treats the payment of loans as a service rendered.
“Since Tata Sons is the holding company, it is liable to pay 18% GST on behalf of Tata Teleservices,” a senior official told ET. “The matter is being pursued by DGGI and the department is of the view that this route could be taken by other companies to avoid paying GST levied on services rendered and hence setting a precedent is a must… While the case is time barred in 2025, the investigation is expected to be completed soon and the assessing officer is likely to even show-cause the company.”
NTT DoCoMo had acquired a 26.5% stake in group company Tata Teleservices in 2009. The two sides had agreed at the time that the Japanese company could exit the venture at a pre-determined minimum price—at least half what it paid to acquire the stake. The Japanese firm sought to exercise that option due to Tata Teleservices' financial struggles. The Reserve Bank of India<\/a> (RBI), however, was of the view that such an exit could only take place at fair market value in tune with a rule amended in 2013. Tata Sons, then under the leadership of Cyrus Mistry, cited this and said it couldn’t pay the agreed amount. Docomo filed for international arbitration and won an award of $1.17 billion.
In November 2017, by which time Mistry had been ousted, Tata Sons announced it had reached an agreement with NTT DoCoMo for an out-of-court settlement of the dispute.
The NTT DoCoMo issue is said to have been one of the points of discord between Mistry and Tata Sons chairman emeritus Ratan Tata. Tata was reportedly unhappy with the manner in the matter had been handled and was of the view that the group's inability to honour its commitment had hurt its image internationally.
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