Tax
Volkswagen Slapped with Rs 23,200 Crore Tax Demand in India Amid Evasion Allegations, Investors on Edge!
Indian tax authorities have accused Volkswagen of wrongly classifying its car imports for 12 years to evade Rs 12,246 crores in taxes. If found guilty, the automaker could face dues of approx. Rs 23,400 crore, including penalties and interest. The dispute, the largest import tax demand in India’s history, has raised concerns among investors about prolonged legal battles affecting business operations.
Authorities claim Volkswagen used a clandestine scheme to import auto parts in separate shipments instead of declaring them as “completely knocked down” (CKD) units, which attract higher taxes of 30-35%. In contrast, other automakers, including Mercedes-Benz, BMW, and Hyundai, correctly classified their imports. South Korean automaker Kia initially followed a similar practice but revised its import classification after an investigation, though it is still contesting a Rs 1,353.89 crores tax demand from 2024.
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Volkswagen argues that India took 12 years to review shipment records, delaying the investigation. However, tax officials counter that the delay was due to Volkswagen’s failure to provide required documents on time. The company also claims the tax demand contradicts India’s own import tax regulations.
The Mumbai High Court is expected to rule on Volkswagen’s appeal in the coming days. During recent hearings, India’s Additional Solicitor General, N. Venkataraman, criticized Volkswagen, stating, “Don’t be the victim here. If you don’t follow the law, we will initiate action.”
Volkswagen’s Indian unit, Skoda Auto Volkswagen, Kia, and India’s tax department have not commented on the case. If the ruling goes against Volkswagen, it could impact the company’s already limited presence in India’s car market, where its Audi brand lags behind competitors like Mercedes-Benz and BMW.