The Ministry of Finance has called off negotiations with Vodafone Plc to resolve the Rs 200 billion tax issue. The move follows the company’s insistence on clubbing the dispute over Rs 37 billion payable on the sale of its call centre business as part of the overall negotiations.

Vodafone Plc also declined to accept the Ministry of Finance’s proposal to initiate arbitration proceedings under the Indian law. Instead, it wanted the conciliation to take place under the United Nations Commission on International Trade Law. However, the Indian Government has turned down this proposal. Earlier, the Ministry of Finance had sought the cabinet’s approval to withdraw its decision to begin a reconciliation process with Vodafone Plc.

The ministry of Finance’s decision to call off reconciliation talks has come in the wake of a letter from Vodafone Plc on January 15, 2014 initiating action against the Indian government under the India-Netherlands Bilateral Investment Promotion and Protection Agreement. Vodafone International Holdings BV, the entity involved in the dispute, is registered in the Netherlands.

The notice from the operator states that the tax notices will lead to substantial financial losses to the company. The Ministry of Finance has stated that the notice further demonstrates that Vodafone Plc is not willing to have conciliation within the scope of the cabinet. Once the cabinet approves the proposal to end reconciliation talks, the tax authorities will proceed to collect dues from the operator under the Income Tax Act.