Volkswagen has filed a lawsuit against the Indian authorities to cancel an "impossibly enormous" tax demand of $1.4bn, claiming that it contradicts the country's import taxation rules, reported Reuters, citing court papers.
The dispute, which involves the importation of car parts, could impact the company's business plans and foreign investment in India.
Skoda Auto Volkswagen India, Volkswagen's local unit, has approached the High Court in Mumbai, stating that the tax demand jeopardises its $1.5bn investment in the country and could sour the foreign investment climate, reported the news agency citing a 105-page filing that is not public.
Issued in September, the tax notice to Skoda Auto Volkswagen India represents what it claims to be the largest import tax demand by India.
The automaker has been accused of utilising a tactic to circumvent higher import duties by breaking down imports of certain VW, Skoda, and Audi vehicles into multiple individual parts.
The authorities in India accused Volkswagen of importing nearly the entire car in an unassembled state, which should have incurred a tax of 30-35% as per the rules for completely knocked down units (CKDs).
However, the company allegedly avoided paying the full tax by misclassifying the imports as individual parts arriving in separate shipments, resulting in a lower levy of just 5-15%.
According to the court filing submitted by the company, the tax notice is “in complete contradiction of the position held by the government ... (and) places at peril the very foundation of faith and trust that foreign investors would desire to have in the actions and assurances” of the administration.
Volkswagen India, in the court filings, stated that it had consistently communicated with the Indian government regarding its "part-by-part import" approach and secured support in 2011.
“There is no exclusive utilisation of the parts towards manufacture of one specific car," the company said in the filing.
Challenging the tax liability, Volkswagen stated it did not import car parts as a single kit" but shipped them separately to be combined with local components.
Indian authorities allege Volkswagen India used internal software to place bulk orders for car components to suppliers in different countries. Once the order was placed, the software allegedly broke them into hundreds of parts for separate shipment.
The car components would then arrive at Indian ports under different invoices at roughly the same time, the authorities alleged.
However, Volkswagen informed investigators it was leveraging this approach to enhance "efficiency of operations".
Lire la suite
Despite being a minor player in India's four million units a year automotive market, the tax dispute adds to Volkswagen's global challenges, including cost-cutting measures and competition from Chinese manufacturers.
In December 2024, the company said it plans to axe 35,000 jobs in Germany and divest some operations in China.
The High Court in Mumbai is set to begin hearings on the case on 5 February.
"Volkswagen sues India over $1.4bn tax demand" was originally created and published by Just Auto, a GlobalData owned brand.
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