Indian authorities made demand of USD 1.4 billion from Volkswagen Group
Volkswagen, the German automobile manufacturer, has initiated legal action against Indian authorities to contest a tax demand of USD 1.4 billion (over Rs 12,000 crore), as per a report by Reuters. The Indian arm of the automaker, Skoda Auto Volkswagen India Pvt Ltd has reportedly told the Mumbai High Court that the tax dispute poses a risk to the OEMs investments of USD 1.5 billion in the country. Furthermore, it will hamper the brand's foreign investments.
It is to be noted that the Indian government issued a tax notice to the Volkswagen Group in September 2024 in the view of implementation of an import strategy to pay a lower duty. Specifically, the strategy enabled the brand to break down imports of Volkswagen, Audi, and Skoda cars into individual parts.
Also Read: Govt Cuts Import Duties On High Capacity Bikes; Harley Davidson Bikes To Get Cheaper?
Indian authorities have accused the German brand of importing a car in an unassembled condition. This allegedly enabled the brand to import them as "individual parts" coming separate shipments resulting in payment of 5-15 percent tax. However, the brand was liable to pay 30-35 percent tax because the cars should have been classified as CKD (completely knocked down) units.
Defending itself in the court challenge, Volkswagen India said that it had kept the Indian government updates of its strategy of "part-by-part import". Furthermore, the brand claims that it had received clarifications in its support in 2011.
Volkswagen Group further says 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, as per report.
According to Reuters, there has been no reply from the Ministry of Finance and the customs official who issued the demand order, and a spokesperson for Volkswagen in Germany also did not respond at the time the story was published.
The Indian branch of Volkswagen stated that it is utilizing all legal avenues as it collaborates with authorities and is dedicated to maintaining "full compliance" with all applicable global and local regulations.
It is to be noted that the Indian government issued a tax notice to the Volkswagen Group in September 2024 in the view of implementation of an import strategy to pay a lower duty. Specifically, the strategy enabled the brand to break down imports of Volkswagen, Audi, and Skoda cars into individual parts.
Also Read: Govt Cuts Import Duties On High Capacity Bikes; Harley Davidson Bikes To Get Cheaper?
Indian authorities have accused the German brand of importing a car in an unassembled condition. This allegedly enabled the brand to import them as "individual parts" coming separate shipments resulting in payment of 5-15 percent tax. However, the brand was liable to pay 30-35 percent tax because the cars should have been classified as CKD (completely knocked down) units.
Defending itself in the court challenge, Volkswagen India said that it had kept the Indian government updates of its strategy of "part-by-part import". Furthermore, the brand claims that it had received clarifications in its support in 2011.
Volkswagen Group further says 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, as per report.
According to Reuters, there has been no reply from the Ministry of Finance and the customs official who issued the demand order, and a spokesperson for Volkswagen in Germany also did not respond at the time the story was published.
The Indian branch of Volkswagen stated that it is utilizing all legal avenues as it collaborates with authorities and is dedicated to maintaining "full compliance" with all applicable global and local regulations.
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