New Delhi: The Indian government has sent a major tax evasion notice to Volkswagen, accusing the company of underpaying import duties by around ₹11,842 crore, which translates to roughly $1.4 billion. The problem is that the German automobile company avoided higher taxes on car parts for its brands Audi, Skoda, and Volkswagen.
What’s the Allegation?
In SKODA Auto Volkswagen India the Indian arm of Germany’s Automobile giant VW allegedly imported near complete autos almost in knocked down completely with CKD units to add to this, taxes is levied at an at a much higher range in the form of 30-35%.However, the company is accused of misclassifying them as individual car parts, which are taxed much lower, at 5-15%. By doing this, they allegedly avoided paying the full taxes due.
Reports suggest the company owed about $2.35 billion in taxes but paid only $981 million, leading to a shortfall of about $1.36 billion.
What’s in the Notice?
The Customs Office in Maharashtra issued a 95-page notice detailing how Volkswagen’s operations were allegedly structured to dodge higher duties. The notice calls this setup “artificial” and claims it was done intentionally to reduce tax payments. Volkswagen now has 30 days to respond and explain why they shouldn’t face penalties.
Volkswagen’s Reaction
In response, Skoda Auto Volkswagen India said they are a responsible company that follows the law and intends to work closely with authorities to address the matter. However, the company hasn’t shared specific details about their plans to handle the allegations.
What Could Happen Next?
If Volkswagen is found guilty, they could face steep fines. In some cases, penalties can be as high as 100% of the evaded amount. This means the total financial hit for Volkswagen could go up to $2.8 billion, including the original shortfall and additional penalties.
The Bigger Picture
This isn’t the first time multinational companies in India have been under scrutiny for their tax practices. There have been several cases where businesses were accused of misclassifying imports to reduce taxes. The outcome of Volkswagen’s case could set an important example for how such issues will be handled going forward.
