Tata Sons gets Rs 1,500 crore tax relief in Docomo case

The Adjudicating Authority of the Goods and Service Tax (GST) department has dismissed a demand of over Rs 1,500 crore on Tata Sons over a settlement deal with Docomo. The department could now contest this decision before the high court. 

According to a report in The Economic Times that quoted officials, the AA order will act as a precedent for companies engaged in arbitration. 

The Directorate General of GST Intelligence (DGGI) had claimed 18 per cent GST on the $1.27 billion that Tata Group paid to Docomo in 2019 to settle a dispute with Tata Teleservices. The group had argued that since the payment was made on behalf of Tata Teleservices, it should be treated as a loan to a group firm and hence liable for 18 per cent GST. 

Tata Sons also argued that the payment was the result of an arbitration proceedings in London and hence not liable for GST. It eventually cited circulars by the Central Board of Indirect Taxes and Customs (CBIC) in 2022 and 2023 to claim that GST could not be levied on liquidated damages. 

NTT Docomo had acquired 26.5 per cent stake in Tata Teleservices in 2009 when the Japanese company had decided to exit the venture at a pre-determined minimum price, which it sought to exercise in 2015. 

Tata Sons declined to pay the agreed amount citing Reserve Bank of India’s view that such an exit could take place at fair market value as per the amended rule of 2013. Docomo filed for international arbitration and said it received $1.27 billion by an international arbitration court for its stake in Tata Teleservices.