Just a week ago the Central Board of Excise and Customs (CBEC) issued a show-cause notice to Honda, demanding Rs. 164 crores as the company paid excise duty on discounted prices of the Brio and Jazz, rather than paying the duty on production cost of the cars. Now CBEC has headed towards the German giant, BMW, and probably will serve a Rs. 650 crore show-cause notice to the automaker for tax evasion on completely knock down units.
CBEC believes that BMW has imported semi-knock down units (SKD) imposing 30% duty tax but paid only 10% duty which is levied on completely knock down (CKD) units. Department of Revenue Intelligence and CBEC jointly inspected the BMW Chennai plant in the last few days to collect more information regarding the false accounting. The Tax authorities charge 30% duty on CKD as well, except the engine and transmission, but they are restricted not to be imported in a pre-assembled format.
CBEC believes that BMW imported the engine and transmission in a pre-assembled format but paid the duty according to completely knock down schedule. BMW assembles the X1, X3, 3-Series, 5-Series and 7-Series at its Chennai plant. The 1-Series will join assembly operation later this year. The company holds the second position in the Indian luxury car market which is growing at a fast pace in the country. This news make us believe that higher tax policies in India are always a reason behind such blemish.
Source – Economic Times
