Vodafone Idea receives Rs 638 crore GST penalty order; co says it will take legal action

Jan 1, 2026

Synopsis
Vodafone Idea faces a Rs 637.91 crore penalty from CGST Ahmedabad South. The government has provided significant relief by freezing AGR dues and approving a five-year payment moratorium. This move aims to support the telecom operator amidst financial stress and ensure competition in the sector. The company awaits formal communication on these developments.

Vodafone Idea has received a penalty order of Rs 637.91 crore from the Office of the Additional Commissioner, Central Goods and Services Tax (CGST), Ahmedabad South, according to a regulatory filing released by the company on Thursday.

The order has been passed under Section 74 of the Central Goods and Services Tax Act, 2017, confirming a penalty of Rs 6,37,90,68,254 along with the demand of tax and applicable interest, the company said.

Vodafone Idea said it received the order on December 31, 2025.

According to the filing, the action relates to allegations of short payment of tax and excess availment of input tax credit. The maximum financial impact on the company would be to the extent of the tax demand, interest and penalty levied under the order.

However, the telecom operator said it does not agree with the order and will take appropriate legal action against it.

Centre relief on AGR dues

Centre has extended significant relief to Vodafone Idea by freezing the telecom operator’s outstanding adjusted gross revenue (AGR) dues and approving a five-year moratorium on payments.

The Cabinet-approved relief package, which confirms an earlier Economic Times report dated December 15, provides for the freezing of Vodafone Idea’s statutory dues at ₹87,695 crore as on December 31. However, the company told stock exchanges that it has not received any formal communication from the government on the proposed relief.

Responding to exchange queries, Vodafone Idea said: “We have not received any communication from the government in relation to the above reported matter. As and when there is any development which requires disclosure, we will do the needful.”

Officials familiar with the matter previously told ET that the frozen dues would be repaid over a 10-year period, from FY 2031-32 to FY 2040-41. The dues will also be reassessed by the Department of Telecommunications based on deduction verification guidelines and audit reports, a process that could potentially lower the final payable amount.

However, AGR liabilities relating to FY 2017-18 and FY 2018-19 will continue to be payable by Vodafone Idea over the next five years, from FY 2025-26 to FY 2030-31, the report said.

The government is expected to formally convey the relief details to Vodafone Idea through an official communication in the coming days.

SC verdict on Vi's fate

The AGR dispute stems from a Supreme Court ruling in October 2019, which upheld the government’s definition of adjusted gross revenue and covered dues up to FY 2016-17. Subsequently, the Department of Telecommunications calculated additional dues for FY 2017-18 and FY 2018-19 and raised demands on telecom operators, including Vodafone Idea and Bharti Airtel.

In September 2021, the government granted a four-year moratorium on AGR dues up to FY 2018-19, which expires in the current financial year. Under the latest relief framework, Vodafone Idea has been granted an additional five-year moratorium for AGR dues up to FY 2016-17, while dues for FY 2017-18 and FY 2018-19 remain payable.

Separately, the government had earlier approved conversion of AGR dues into equity, following which it now holds a 49 per cent stake in Vodafone Idea. The Aditya Birla Group and Vodafone Group Plc hold 9.50 per cent and 16.07 per cent stakes, respectively.

The relief applies only to Vodafone Idea, while Bharti Airtel continues to service its statutory dues as scheduled, the report said. Government officials cited in the report said the measures were aimed at preserving competition in a highly concentrated telecom sector and safeguarding consumer interests.

Vodafone Idea has been under sustained financial stress, losing market share to rivals Bharti Airtel and Reliance Jio, and lagging in 5G rollout due to funding constraints. The relief follows Supreme Court orders dated November 3 and December 27, 2025, which allowed the government to revisit the issue in view of public interest, the government’s substantial stake in the company, and the interests of around 20 crore subscribers.

The resolution of the AGR issue could improve Vodafone Idea’s ability to raise fresh capital, including its proposed fundraise of ₹25,000 crore.

[The Economic Times]