Volkswagen sues Indian authorities for USD 1.4 billion tax notice: Report

Volkswagen has sued the Indian authorities to quash the USD 1.4 billion (over Rs 12,000 crore) tax demand, according to a Reuters report. Volkswagen’s India unit, Skoda Auto Volkswagen India Pvt Ltd has also told the Mumbai High Court that the said tax dispute puts at risk the group’s investments of USD 1.5 billion in India and will also hamper the foreign investment climate.

• Volkswagen says tax disputes put India investments at risk
• Could also hamper foreign investment climate
• Had informed government about “part-by-part” model

Volkswagen tax notice, latest updates

In September 2024, the Indian government had issued a tax notice to the VW Group for implementing a strategy that enabled breaking down of imports of some VW, Skoda and Audi cars into many individual parts in order to pay a lower duty.

Indian authorities alleged that Volkswagen had imported almost the “entire car” in unassembled condition, which, being CKDs would attract 30-35 percent tax. However, they evaded duty by “mis-classifying” them as “individual parts” coming in separate shipments, which enabled them to pay just a 5-15 percent levy.

Volkswagen India had said that it had kept the Indian government informed of its "part-by-part import" model and received clarifications in its support in 2011, the company says in the court challenge.
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, the January 29 court filing states.

Reuters says that there has been no response from the Ministry of Finance and the customs official who issued the demand order, and a Volkswagen spokesperson in Germany also did not respond at the time of filing of the story.

Volkswagen's India unit said in a statement that it is using all legal remedies as it cooperates with authorities and remains committed to ensuring "full compliance" with all global and local laws.