Tata Sons Receives Major Relief As Authorities Dismiss GST Demand Of Rs 1,500 Crore In Docomo Deal: Report

The DGGI in 2019 issued a GST of 18 per cent on the $1.27 billion paid by the Tata Group holding company to the Japanese telecom firm earlier in 2017 to settle a dispute with Tata Teleservices

The claim was challenged by the Tata group stating that the payment was a result of arbitration proceedings in a London court and therefore didn’t attract any GST.

Source : X/@TataCompanies

Tata Sons found huge relief as the authorities dismissed a GST demand worth more than Rs 1,500 crore from the company. The Adjudicating Authority (AA) of the Goods and Services Tax (GST) department let go of the GST demand from the firm regarding a settlement deal with Docomo.

Quoting officials in the know, The Economic Times reported, “The department has the option of contesting it before the High Court.” The official further said that the AA order would act as a precedent for firms involved in arbitration.

Notably, the Directorate General of GST Intelligence (DGGI) in 2019 issued a GST of 18 per cent on the $1.27 billion paid by the Tata Group holding company to the Japanese telecom firm earlier in 2017 to settle a dispute with Tata Teleservices.

The department noted that as the payment was made on behalf of Tata Teleservices, it would be seen as a loan from Tata Sons to the entity and is, therefore, eligible for 18 per cent GST. The claim was challenged by the group stating that the payment was a result of arbitration proceedings in a London court and therefore didn’t attract any GST.

Following this, in November 2022, the conglomerate submitted a writ petition in front of the Bombay High Court. It cited a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) on August 3, 2022 and another issued on February 28, 2023, claiming that no GST should be applicable on liquidated damages.

In its appeal before the HC, the firm said, “The amount was the due paid on behalf of Tata Teleservices by Tata Sons and not for any services rendered by Docomo. It is an arbitration case that was paid and closed... DGGI is looking at it in a very technical manner.”

The official informed that the AA has depended on these arguments made by the firm while delivering its ruling. “Since this is the order of the AA, it would act as a precedent for other companies facing similar litigations,” the person noted. Notably, NTT Docomo purchased a 26.5 per cent stake in Tata Teleservices in 2009.