Telecoms To Pay Adjusted Gross Revenue (AGR) Dues In 10 Years

The telecom service providers have failed to pay the Adjusted Gross Revenue (AGR) dues to the government. For the interest of the broader public and economic consequences on the nation, the Union of India approached the Supreme Court to approve the formula framed by the government for recovering the past dues from the telecom service providers. The government sought to recover dues in annual instalments over 20 years. It also lists out the adverse impact caused due to non-payment. It devised this formula after extensive discussions at the Cabinet-level. There are dues of Rs 1.43 lakh crore even after part payment by the telecom companies. 

Tata Telecom proposed 7-10 years for payment of dues, Bharti Airtel and Vodafone-Idea offered for paying in 15 years during the hearings. The Department of Telecommunications (DoT) agreed with the Cabinet’s proposal of 20 years. After hearing the arguments, the Supreme Court passed the judgment on Tuesday in this matter.

The Supreme Court observed that arrears have accumulated for the last 20 years. Some of the companies are under insolvency proceedings and have to pay hefty AGR dues. Thus, a span of 20 years is excessive. The Supreme Court ruled that they shall repay the dues in yearly instalments in 10 years commencing from 01 April 2021 up to 31 March 2031

The Supreme Court held that the payment of these dues should be every year in equal instalments. The telecom service providers need to pay the arrears on time. They will pay the amount in toto. Even if there is a single default in the payment of dues, it will attract interest, penalty and interest on the penalty. If it is not on time, it will result in contempt of court.

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The Supreme Court issued directions that there shall not be any reassessment or any dispute raised by the telecom operators upon the judgment passed by the court. At the first instance, the telecom operators shall pay 10% of the total dues by 31 March 2021 to the DoT. The dues shall be payable by 31st March of every succeeding financial year. 

The judgment directs companies to furnish an undertaking for the payment of arrears as per the decision. The companies should give this undertaking within four weeks. The Managing Director or Chairman or any other authorised officer of the companies should provide this undertaking. The telecom service providers and DoT should report the compliance of this order every year on 7th April to the Supreme Court.

The Supreme Court also held that the National Company Law Tribunal (NCLT) would decide the matter of the companies facing insolvency proceedings and the issue of sale of the spectrum by these companies.

The Supreme Court has issued strict directions after assessing the situation regarding AGR dues extensively. It is a relief for Bharti Airtel and Vodafone Idea, which is struggling with losses. The companies have to comply with this decision and follow the directions for payment of AGR dues. Thus, now each telecom provider will have to evaluate its liquidity to continue its service.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in