In its reply to the Vodafone arbitration notice in tax dispute case, the government said that since no law has been amended, there is no cause of action.

“It is premature on behalf of Vodafone," a top finance ministry official said.  

Last month the Dutch subsidiary of Vodafone had served a notice on the Indian government invoking BIPA between India and the Netherlands and threatened international arbitration in the tax case.

The government then set up the IMG to firm up India's respond to the notice given by the telecom giant in the tax case. The group, which is headed by Finance Secretary R S Gujral, include representatives of ministries of external affairs, telecom, law and revenue.

The Finance Minister Pranab Mukherjee recently justified amendment in the Income Tax Act with retrospective effect. The amendment which seemed to be an attempt to overrule the Supreme Court’s verdict on Vodafone-Hutchison deal will be applicable to the assessment year 1962-63. This will have an impact on many foreign investments which will now be open to taxation.

The finance ministry had proposed in the Union Budget some changes in the country's tax rules retrospectively from 1962. This means transactions that took place outside India are taxable. This includes the $11.08 billion (around Rs 55,735 crore today) Vodafone-Hutchison deal.