Volkswagen Under “Life & Death” Situation For $1.4 Billion Tax Dispute Over Imported Parts
Volkswagen India and Indian Tax Authorities are in a legal tussle over tax demand. The Indian Authorities claim Volkswagen is the only automaker to classify car imports for 12 years, evading $1.4 Billion in taxes. If found guilty, the German automaker would need to pay a penalty costing $2.8 Billion.
Volkswagen is one of the many players in the Indian Automotive Market and it is part of the Volkswagen Audi Group that has several brands such as Skoda operating under its umbrella in India. This is also the highest Import Tax demand in the country as of now.
Alleged Use Of Clandestine Scheme
According to Indian Authorities, Volkswagen has used a clandestine scheme to import auto parts in separate shipments, allegedly, to avoid detection. These parts would’ve been termed “Complete Knocked Down” and taxes of around 30% to 35%.
The Indian Tax Authorities have given a rebuttal to Volkswagen by listing 10 automakers i.e. Mercedes Benz, BMW, Hyundai etc. that appropriately classified their imports, despite using split consignments to ship the parts.
Kia’s $155 Million Tax Demand
Kia has been under a similar tax demand of $155 Million because it imported some parts for producing the Carnival Minivan. A Senior Indian Tax official confirmed that Kia “accepted misclassification” and corrected its process. However, there will be a lengthy investigation process as justification for the tax demand.
Outlook
The Bombay High Court is expected to give the verdict on the matter and according to Volkswagen, it is a matter of “Life and Death” for the company. The German manufacturer also blames the Indian Tax Authorities for taking up to 12 years in some cases to review shipment records, hence the interest.
However, the Indian Authorities say that Volkswagen is the reason for the delay as they didn’t provide necessary document in time. Volkswagen has also argued that the tax demand is contradictory to New Delhi’s tax rules on imports of car parts. Lawyers for both parties have been arguing over the classification of imports.
N. Venkataraman, Additional Solicitor General Of India has slammed the brand by saying “Don’t be the victim here. If you don’t follow the law then we will initiate action” criticising Volkswagen. The complications that this matter can significantly impact the import laws of India.
