Essar may pay tax on sale of stake to Vodafone for $5 billion

Essar, which on Thursday exited from the joint venture Vodafone-Essar, may be asked to pay tax upon sale of a part of the equity due to capital gains accruing to the Indian firm.

According to sources, Essar may be asked to pay tax on 10.97 per cent equity held by its Indian subsidiary in Vodafone-Essar.

Essar has 33 per cent stake in Vodafone-Essar. Of this 22.93 per cent is off-shore (held by entities registered outside India) and no tax may be payable on this. The remaining 10.97 per cent is held by Essar Communications Private Limited (an Indian entity) and there will be a tax liability on this portion.

Sources said that 22.03 per cent stake (off-shore) is valued at $3.8 billion and the remaining 10.97 per cent is valued at $1.2 billion.