India serves notice to Volkswagen for evading $1.4 billion duty

India serves notice to Volkswagen for evading $1.4 billion duty

India has accused Volkswagen (VW) of evading $1.4 billion in taxes by misclassifying imports.

The 30 September notice issued by the Office of the Commissioner of Customs in Maharashtra claimed that VW paid lower import taxes on car parts. Instead of $2.35 billion since 2012, the company paid only $981 million.

It said that VW imported ’almost the entire’ car to India in an unassembled condition, attracting a 30-35 percent import tax under the completely knocked down (CKD) rules, but ‘mis-declared and misclassified the imports as ‘individual parts’, paying only a 5-15 percent duty.

The investigation revealed that VW's India unit, Skoda Auto Volkswagen India made the imports. The German automaker allegedly evaded $1.4 billion in taxes. The models included Skoda Superb and Kodiaq, luxury cars Audi A4 and Q5, and VW's Tiguan SUV. The company used different shipment consignments to evade detection and ‘willfully evaded’ higher taxes.

The 95-page notice explained, “The logistical arrangement was an artificial operating structure and a ploy to clear the goods without paying the applicable duty.” Since 2012, VW's India unit should have paid import taxes and related levies of about $2.35 billion to the Indian government but paid only $981 million - a shortfall of $1.36 billion.

However, Skoda Auto stated it was a "responsible organization, fully complying with all global and local laws and regulations. We are analyzing the notice and extending our full cooperation to the authorities."

The alleged tax evasion came when the Wolfsburg-based carmaker is fighting multiple battles at home and abroad. It is in dispute with its labor in Germany over plant closures and layoffs while Chinese competitors are attacking Europe's established carmakers.