The Indian unit of Volkswagen AG is taking a legal recourse in the matter of a tax dispute stemming from alleged misclassifying of imports.
Skoda Auto Volkswagen India Pvt. Ltd. “is availing itself of all legal remedies in response to the showcase notice as permitted under the law,” a company spokesperson told NDTV Profit over WhatsApp. “SAVWIPL is committed to operating as a responsible organisation, ensuring full compliance with all applicable global and local laws and regulations.”
“Compliance with regulatory requirements is one of SAVWIPL's fundamental principles, and we are cooperating fully with the authorities on this matter.”
Volkswagen India has sued the Union of India to quash an “impossibly enormous” tax demand of $1.4 billion, arguing the ask is contradictory to New Delhi's import taxation rules for car parts and will hamper the company's business plans, Reuters reported on Sunday, citing a 105-page filing that's hitherto not public.
The case was filed on 29 January 2025. The matter will be heard next on 5 February, according to the Bombay High Court website. Law firm Economics Law Practice is representing Volkswagen India in the matter.
On 29 November 2024, Reuters first reported that India has issued a show-cause notice to Germany's Volkswagen AG for allegedly evading $1.4 billion in tax by “wilfully” paying less import tax on components for its Audi, VW and Skoda cars, citing a customs document it had reviewed.
The notice, dated 30 September 2024, said Volkswagen used to import "almost the entire" car in unassembled condition—which attracts a 30-35% import tax in India under rules for completely knocked-down units (CKD)—but evaded levies by "mis-declaring and mis-classifying" those imports as "individual parts", paying just a 5-15% duty.
In response, Volkswagen India—in its filing to the Bombay High Court on 29 January—said that the tax dispute puts at risk its investments of $1.5 billion in India, and is detrimental to the foreign investment climate.
“(I've) heard that showcause notice has been issued to Volkswagen by DRI [Directorate of Revenue Intelligence], will look into the matter,” Finance Secretary Tuhin Kanta Pandey told reporters in New Delhi on Monday.
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