Volkswagen is embroiled in a multi-billion dollar tax dispute with the Indian government, which has demanded $1.4 billion in unpaid taxes. The automaker claims that its ‘part-by-part import’ model was approved by the authorities in 2011.
Volkswagen has filed a lawsuit against Indian authorities over what the brand describes as an ‘impossibly enormous‘ tax demand, according to a new report from Reuters – a bill of $1.4 billion.
In 2015, Volkswagen faced a massive lawsuit for installing emissions-cheating software in over 11 million vehicles worldwide.
The scandal, known as 'Dieselgate', led to the recall of affected cars and resulted in significant financial losses for the company.
According to reports, Volkswagen's emissions-cheating devices reduced nitrogen oxide emissions by up to 90% during regulatory tests.
However, on public roads, the vehicles emitted up to 40 times more pollutants than allowed.
The lawsuit led to a $2.8 billion settlement in the United States and billions more in global penalties.
The demand stems from the automaker’s alleged importation of car ‘kits,’ in which vehicles are assembled in large pieces to avoid being imported as a ready-to-drive vehicle. The Indian government says that the automaker has stepped afoul of taxation duties by utilizing this process; VW maintains that position is contradictory to the current regulations, according to Reuters.
In India, Volkswagen vehicles are subject to various taxes, including Goods and Services Tax (GST) and Central Excise Duty.
The GST rate for passenger vehicles is between 28% and 18%, depending on the model and variant.
Additionally, a cess of 1-15% is levied on certain luxury cars.
Central Excise Duty ranges from 20-22.5% for passenger vehicles.
These taxes contribute to the overall cost of Volkswagen cars in India.
The import tax demand, which was first applied to Skoda Auto Volkswagen India back in September, is the largest in Indian history. The Indian government states that the automaker mislabeled nearly-assembled vehicles as individual parts during importation, rather than the more appropriate ‘completely knocked down unit‘ (CKD) marker. These two categories face massively different tax levies: parts face around 5-15% hit, but that figure jumps to 30-35% for CKD units, which is where the Indian government says VW is on the hook.
Skoda Auto Volkswagen India, a subsidiary of the German conglomerate, operates in the Indian automotive market.
As per Indian tax laws, foreign companies are required to pay taxes on their profits earned within the country.
The Indian government imposes a 25% corporate tax rate on domestic and foreign companies alike.
Additionally, Skoda Auto Volkswagen India is also subject to Goods and Services Tax (GST) on its sales and imports.
The company must comply with these tax regulations to avoid penalties and maintain its business operations in India.
VW’s India branch disagrees with the assessment of the situation and argues in private 105-page court documents seen by Reuters that it had previously informed the Indian government of its ‘part-by-part import‘ model, and even received clarification regarding the government’s support of the process in 2011. Furthermore, the automaker maintains that it did not import CKD units, but rather combined large numbers of parts with local components to produce complete vehicles.
If Skoda Auto Volkswagen India were to lose in court, the automaker could be on the hook for $2.8 billion, with the included penalties. It’s not surprising that the automaker would like to avoid that sort of payment — especially when you consider that the company made just $11 million in net profit in India during 2023-2024.
- yahoo.com | Volkswagen Sues India Over $1.4 Billion Tax Bill
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- hindustantimes.com | Volkswagen sues Indian tax authorities over $1.4 billion demand ...
