India vs Volkswagen : Volkswagen has been singled out as the only automaker that for 12 years misclassified its imports here to avoid $1.4 billion in taxes, according to court documents, even as rival Kia adopted different practice after being called out.Volkswagen is a small player in a large Indian car market that is the world’s third largest, and its Audi brand trails luxury rivals like Mercedes and BMW. If convicted, it may owe $2.8 billion in payments, including fine and accrued interest.
Volkswagen’s Indian unit calls the court fight over the record tax demand a matter of “life and death”. India’s biggest demand for import taxes so far has also revived investor concerns that long drawn disputes may hold up their plans.India alleges that Volkswagen employed a secret scheme to import such auto parts in multiple shipments, to avoid detection and pay less tax, rather than declaring items as “completely knocked down”, or CKD, units which attract higher taxes of 30% to 35%.
Taking the fight to Volkswagen’s court appeal, tax authorities named 10 car makers from Mercedes-Benz (MBGn. DE), opens new tab to BMW (BMWG. DE), opens new tab and Hyundai (005380. KS), opens new tab, (HYUN. South Korea’s Kia complied after facing a warning, the authorities said in their 506-page filing that is not public but was seen by Reuters.
Earlier they were considering such imports on parts, and for that there was investigation, ” the authorities told the court of the change in practice at Kia, which is also still contesting a tax demand of $155 million.“After the investigation, they have begun correctly labeling such imports.”
Reuters reported this month that Kia was appealing a $155-million tax bill issued in 2024 for the simultaneous import — in two shipments — of parts for its Carnival luxury minivan. Kia says it is investigating the matter and cooperating with authorities.A senior Indian tax official, who spoke on condition of anonymity, said Kia had “agreed on misclassification” and amended its process, but also highlighted the lengthy period of investigation, as among reasons for contesting the demand.
Volkswagen (VOWG_p.DE) domestic unit Skoda Auto Volkswagen, Kia and India’s tax department did not respond to Reuters queries.Now, Volkswagen has to wait for the verdict of the Mumbai High Court – which will come in a few days – that will either be a replay or reversal of its own tax demand.
Volkswagen blamed India for taking as long as 12 years to re-examine some of the shipment records, but tax officials have said the investigation delay occurred because the company failed to submit required documents.
NEW DELHI, Oct 12 (Reuters) – The mighty Indian technology giant Infosys is facing a hefty tax penalty but it’s not for a traditional reason such as not paying enough, but rather for allegedly failing to bring enough new jobs to the country on the back of foreign investment. In recent court hearings, lawyers for the two sides have clashed over how imports should be classified.“Don’t be the victim here,” N. Venkataraman, India’s additional solicitor general, told the court last week, when attacking Volkswagen. “For us, if you follow law we will take action.