The Indian government has reportedly accepted a proposal from Vodafone to enter informal talks to resolve the long-running tax dispute over the operator's acquisition of Vodafone India.
The government and company have agreed to enter talks to work out a mutually agreeable set of criteria to settle the dispute, the Economic Timesreported, citing an anonymous source.
These negotiations could lead to an agreement to enter conciliation in a neutral jurisdiction acceptable to both parties.
Prior to this point, India had been insisting that conciliation talks be held domestically, and had proposed to hold talks in India in June. But Vodafone resisted, as it does not want to settle the matter under Indian jurisdiction.
Vodafone by contrast had invoked a bilateral investment treaty in an attempt to have the talks under the jurisdiction of the United Nations Commission on International Trade Law (UNCITRAL).
Vodafone and Indian tax officials have been in dispute for five years over a 200 billion rupee ($3.19 billion) tax demand. The disagreement stems from Vodafone's 2007 acquisition of Vodafone India from Hutchison.
Last year Vodafone won a Supreme Court victory declaring that India's Tax Department had no authority over the acquisition, as the transaction took place between two offshore entities.
But the government responded by retroactively changing Indian law so that such transactions are taxable, and then serving Vodafone with a fresh demand. The retroactive change drew strong criticism from the international investment community.