Vedanta Resources Limited ("the Company") and its consolidated subsidiaries (the "Group") is a diversified natural resources company engaged in exploring, extracting and processing minerals and oil & gas. With its presence across India, South Africa, Namibia, Ireland, Australia, Liberia and the UAE, the Group engages in the exploration, production and sale of zinc, lead, silver, copper, aluminium, iron ore and oil & gas. The Group is also present in commercial power generation, steel manufacturing and port operations in India and manufacturing of glass substrate in South Korea and Taiwan.
Vedanta's portfolio of world-class, low-cost, scalable assets consistently generates strong profitability and delivers robust cash flows. Its core divisions hold industry-leading market shares by constantly raising the bar across the wide canvas of operations.
By preparing an annual Tax Transparency Report, Vedanta aims to enhance the trust quotient between its businesses and stakeholders, especially in countries where it operates.
Contribution to the Exchequer in FY2019-20
Vedanta contributed USD 4.7 billion – about 40% of its turnover – to the Exchequer where it operates via a wide range of contributions such as corporate income taxes, royalties, profit on oil as well as significant indirect revenue contributions by way of withholding taxes and indirect taxes.
Tax Governance Strategy
Substance, Transparency and Arm's-length Principle
Transparency is a core value since the Company firmly believes in long-term sustainable value creation for multiple stakeholders. Vedanta is at the forefront of tax reporting by managing its tax affairs succinctly and honestly.
For the Group, 'substance' denotes economically owning an asset and actively executing decisions that entail management of risks associated with any taxable result. All transactions have a commercial and business reason and, therefore, the Company adheres to the arm's-length principle for all its dealings.
Tax Risk Management
In line with its tax governance model of being transparent, Vedanta maintains internal controls in the form of compliance calendars, internal audit process by MAS (Management Assurance Services) teams and authorization matrix under the maker-checker concept.
The Group strives to ensure that commercial transactions are structured in tax-efficient ways where credible technical analysis and interpretation is available. Specifically, it ascertains that these transactions are in full compliance with the law and/or judiciary directions. The Group claims tax incentives and exemptions as legitimately available in the geographies where it operates.
Consequently, material tax risks or disputes are reported to an Audit Committee. Their review includes an assessment of probabilities of different outcomes, cash flow and reputational impact. Vedanta has also formed an internal 'Tax Council' that acts as an overarching governing body to the tax function as a whole.
Dynamic Tax Environment
The Group strives to strengthen its systems, processes, group structures and suchlike to comply with changing tax laws across the globe. A case in point relates to the advent of Goods & Services Tax (GST) in India, where most business operations of the Group are located.
Relationship with Tax Authorities and Dispute Resolution
The Group maintains an open, honest, transparent and constructive relationship in all dealings with the tax authorities in the jurisdictions it operates within.
The Group actively participates in the tax authority's formal consultation processes on matters having a material impact on its businesses. All dispute resolution mechanisms, such as arbitration, conciliation and mechanisms available under various Double Taxation Avoidance Agreements, are appropriately evaluated, including a resolution by engaging with the Government through industry groups or forums.
Vedanta is dedicated to working based on seven pillars of its organisational culture: Entrepreneurship, innovation, integrity, excellence, respect, trust, and care.
Additional highlights
In the past seven years under the NDA Government, Vedanta's contributions to the Exchequer have been the highest by any corporate so far – USD 46.4 billion (39% of turnover). In terms of Direct Taxes, the Company's contribution is amongst the top companies in the private sector.
Besides, Direct Economic Value worth USD 12,475 million was generated. Moreover, the Company paid Rs 9,900 crore as royalties to the State Governments of Chhattisgarh, Rajasthan, Andhra Pradesh, Goa and Karnataka, based on the extraction of bauxite, lead-zinc, iron ore, crude oil and natural gas. The most significant of these is the royalty that Hindustan Zinc Ltd pays to the State Government of Rajasthan, where all its mines are located.
The Company also pays cess to the Government of India. For oil & gas operations generally, royalty and cess payments are made by the joint operation partners in proportion to their participating interest. Vedanta contributed USD 2.1 billion as royalty, profit from petroleum and oil cess during 2019-20.