Fri Nov 29 12:27:13 UTC 2024: ## Volkswagen Faces $1.4 Billion Tax Evasion Claim in India

**Mumbai, India** – German automaker Volkswagen is facing a massive tax evasion claim in India, with authorities alleging the company underpaid import duties by $1.4 billion. The demand, one of the largest of its kind, stems from a September 30th notice issued by the Office of the Commissioner of Customs in Maharashtra.

The notice alleges that Volkswagen’s Indian subsidiary, Skoda Auto Volkswagen India, intentionally misclassified imported car components as individual parts to avoid higher import taxes. Instead of paying the 30-35% duty levied on completely knocked-down (CKD) units—essentially unassembled cars—the company allegedly paid only 5-15% duty by shipping components in separate consignments. This practice, applied to models including the Skoda Superb and Kodiaq, Audi A4 and Q5, and VW Tiguan, reportedly occurred since 2012. The investigation found that the company should have paid approximately $2.35 billion in import taxes and levies but only paid $981 million, leaving a shortfall of $1.36 billion.

Skoda Auto Volkswagen India issued a statement asserting its commitment to legal compliance and its cooperation with the authorities. However, Volkswagen has yet to publicly comment on the notice, which demands a response within 30 days and warns of potential penalties. A government official, speaking anonymously, indicated penalties could reach 100% of the evaded amount, potentially adding another $1.4 billion to the bill.

The investigation revealed that Volkswagen’s internal software facilitated the alleged scheme. Bulk car orders were broken down into numerous individual parts, shipped separately from various locations, and then arrived at Indian ports around the same time. The company claimed this method was for operational efficiency, a justification rejected by authorities. Investigators also noted that competitor Mercedes-Benz followed proper procedures by importing CKD units and paying the corresponding 30% tax.

This case adds to the challenges Volkswagen faces in the Indian market, where it holds a relatively small share. The investigation follows searches of Volkswagen facilities in 2022 and the questioning of the company’s India Managing Director, Piyush Arora. The incident highlights ongoing tensions between foreign companies and Indian tax authorities, with other automakers like Tesla and BYD also embroiled in tax disputes.

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