The Supreme Court on Monday dismissed the Centre’s challenge to a Bombay High Court order quashing a ₹363 crore GST demand against Vodafone Idea in relation to its erstwhile entity, Vodafone Mobile Services Ltd (VMSL).
The court upheld the view that tax proceedings cannot be continued against a company that no longer exists after a merger.
A bench of Justices J.B. Pardiwala and K. Vinod Chandran, rejecting the tax department’s plea, said the issue was already covered by the Supreme Court’s 2019 judgment in the Maruti Suzuki case, which dealt with tax proceedings against a company after its merger.
The dispute concerns proceedings against VMSL arising from the sale of its telecom tower business as a going concern. VMSL had entered into an agreement with ATC Telecom Infrastructure on 13 November 2017 to sell its entire tower business on a slump-sale basis.
VMSL later merged with Vodafone India Ltd and Idea Cellular under an NCLT order dated 30 August 2018. The merger was also brought to the notice of the GST authorities when Idea Cellular’s GST registration was amended.
The Directorate General of GST Intelligence began its investigation in February 2024. On 1 August 2024, it issued a show-cause notice to VMSL demanding ₹363 crore along with a penalty. The department alleged that the transfer of the business as a going concern was an exempt supply and that VMSL was not entitled to input tax credit.
VMSL challenged the proceedings, arguing that it had already ceased to exist following the 2018 merger and could not be subjected to fresh tax proceedings.
The Centre relied on Section 87 of the CGST Act, arguing that the provision permits GST liabilities of companies involved in a merger to be addressed even after the merger.
The high court rejected this argument in its 29 April 2026 order. It held that Section 87 does not allow the department to issue a notice against an entity that had already ceased to exist.
The high court said that after a merger, the old company has no status in law, and proceedings cannot be initiated against it. It held that the show-cause notice was issued without jurisdiction and that the proceedings were void from the beginning. The Centre subsequently moved to the Supreme Court.
The Supreme Court referred to its 25 July 2019 judgment in the India Ltd tax case, where the top court held that tax proceedings against a company that had ceased to exist following an amalgamation were invalid, particularly when the tax authorities were aware of the merger. The Maruti Suzuki case involved an income-tax assessment following the merger of Suzuki Powertrain India Ltd with Maruti Suzuki India Ltd.
For , the ruling comes at a time when the country’s third-largest telecom operator is trying to regain its footing after reporting its first quarterly subscriber addition since the merger. Its customer base rose to 193.1 million in June quarter (Q1FY27) from 192.8 million in the preceding quarter.
Vodafone’s finances
The company’s net loss narrowed to ₹3,754 crore in Q1FY27 from ₹6,608 crore a year earlier. Revenue rose 6% year-on-year to ₹11,689 crore, while quarterly Ebitda increased 9.1% to ₹5,034 crore.
Vi, however, continues to face financial pressure. It plans to raise ₹35,000 crore from banks for network expansion and has ₹49,000 crore in spectrum dues to repay over the next three years. It also needs to generate positive cash flow.
Queries have been sent to Vodafone Idea and the GST department seeking their response to the Supreme Court order. Their responses were awaited till press time