Volkswagen Lawsuit: Indian Tax Dispute Over $1.4 Billion Tax Bill
Volkswagen has filed a legal challenge against the Indian government over a substantial $1.4 billion tax demand, asserting that the claim is inconsistent with the country’s import tax regulations. The German automaker’s Indian division, Skoda Auto Volkswagen India, is contesting the tax notice, arguing that it jeopardizes its $1.5 billion investment in the country.
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The lawsuit, filed in the Mumbai High Court on January 29, 2025, follows a September 2024 notice from Indian tax authorities accusing Volkswagen of circumventing customs duties by importing vehicle parts individually rather than as fully assembled cars. According to Reuters, the case revolves around Volkswagen’s strategy of breaking down VW, Skoda, and Audi cars into numerous separate components for import, thereby paying a reduced tax rate.
Indian officials claim that Volkswagen imported nearly complete cars in an unassembled state, which would typically attract a 30-35% duty for completely knocked-down units (CKDs). However, by classifying these items as “individual parts” and shipping them separately, the company paid only 5-15% in taxes. This strategy has led to accusations that Volkswagen is attempting to avoid paying the full tax amount.
Volkswagen contends that it followed the proper process, notifying the government of its import model and receiving clarification on the matter back in 2011. In its court filing, the company emphasizes that the recent tax demand contradicts the government’s previous stance, undermining trust and confidence for foreign investors in India.
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The dispute has raised concerns over the security of foreign investments in the country, with Volkswagen arguing that the demand could endanger future business operations. The company’s filing states that the Indian government’s new stance threatens the foundation of trust needed for ongoing investments.
Volkswagen Lawsuit: Indian Tax Dispute Over $1.4 Billion Tax Bill
