Tata Sons has disputed a tax demand of ₹1,500 crore at a goods and services tax authority hearing related to a $1.27 billion (₹10,415 crore) settlement with Japan’s NTT Docomo in 2017 over a defunct telecom joint venture.

What Happened? Tata Sons maintains that the tax demand is unfounded as liquidated damages are not subject to goods and services tax (GST), sources told Economic Times. Officials are currently examining the documents to decide whether to issue a show cause notice or close the case.

The Directorate General of GST Intelligence (DGGI) has sought a three-month extension to review the documents submitted by Tata Sons. The Bombay High Court will consider the plea in July.

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The tax dispute centers around whether Tata Sons, as the holding company, is liable to pay GST on a payment made on behalf of unit Tata Teleservices for settlement with NTT Docomo. The GST department views the payment as a loan made to the subsidiary and believes the company is liable to pay GST on the amount.

Tata Sons has cited circulars issued by the Central Board of Indirect Taxes and Customs to support its claim that GST should not apply to liquidated damages. The company maintains that the payment made to NTT Docomo was a result of arbitration proceedings and not for any services rendered.

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