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Volkswagen used ‘secret scheme’ to pay lower taxes: Govt tells Bombay HC
Tax authorities singled out Volkswagen and said the German automaker was the only company to misclassify imports and evade tax.
Tax authorities in India have singled out Volkswagen as the only automaker which wrongly classified car imports for 12 years to evade tax worth $1.4 billion, Reuters reported citing court documents.
The authorities were speaking during a case filed by Volkswagen at the Bombay high court against the tax demand of the government of India. Volkswagen had earlier called the tax demand a matter of “life and death”. If found guilty, the company could face dues worth $2.8 billion, including penalty and delayed interest.
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The government says Volkswagen used a secret scheme to import car parts in separate shipments and assemble the car in India. This helped it pay lower tax duties as imports of parts are taxed at lower rates while import of assembled cars are taxed at higher rates.
Authorities listed 10 car manufacturers, including Mercedes-Benz, BMW and Hyundai, which correctly classified their imports despite using ‘split consignments’ to bring in parts.
As part of their 506-page filing seen by Reuters, they said that Kia also began correctly classifying their imports after the South Korean company was warned.
“Earlier, they were clearing such imports as parts, against which investigation was undertaken,” the authorities told the court about the altered practice at Kia, which continues to fight a demand for $155 million in tax. “Post the investigation, they have started classifying such imports correctly,” they added.
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Reuters had previously reported that Kia was contesting a $155-million tax demand from 2024 for imports of parts for its Carnival luxury minivan. A senior tax official told the publication that Kia had “accepted misclassification” and corrected its process.
The court is expected to decide the outcome of the case within days. Volkswagen blames India for taking 12 years to review some shipment records, but tax authorities say the investigation delay came about as the company did not provide necessary documents in time.
