Volkswagen, Skoda and Audi import almost their entire vehicles in India

A notification issued on September 30 said that Volkswagen had bypassed the 30 to 35 percent tax on unassembled vehicles (classified as CKD)

The Indian government accused Volkswagen of underpaying $1.4 billion in import duties due to misclassification of auto parts. A notice issued on September 30 said that Volkswagen has bypassed the 30% to 35% tax imposed on unassembled vehicles by calling them “individual parts” % tax, ranging from 5 to 15% per car. point.

Volkswagen imported nearly complete cars for assembly in India, using staggered shipments to disguise their assortment, according to officials. Customs authorities described the practice as a deliberate plan to avoid higher tariffs. According to reports, Volkswagen India owed US$2.35 billion in debt over the past decade, but only paid US$981 million, resulting in a deficit of US$1.36 billion.

The notification also outlines the logistics methods employed, claiming parts are shipped in separate containers with multiple invoices over several days but arrive at Indian ports at the same time. Investigators rejected Volkswagen’s reasons for “operational efficiency,” claiming the process was designed to evade taxes.

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Skoda Auto Volkswagen India issued a statement confirming its commitment to comply with all laws and regulations and said it is cooperating with the authorities to review the allegations. The company has been given 30 days to respond. If convicted, the automaker could face fines equal to unpaid tariffs and its liabilities could double to $2.8 billion.

The development adds to Volkswagen’s existing woes in India’s highly competitive photovoltaic market, in which it holds a small share. Its luxury Audi brand has lagged behind Mercedes-Benz and BMW. Indian investigators also pointed out that competitors, including Mercedes, complied with CKD import norms and paid the applicable tax of 30%.

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In 2022, authorities conducted inspections of Volkswagen plants, including two manufacturing plants in Maharashtra, during which records, electronic communications and other data were seized. The investigation found that the company’s internal system split large purchase orders into smaller shipments, thereby reducing its tax liability.

The case is part of a wider pattern of multinational companies encountering tax disputes in India. Tesla has criticized the country’s exorbitant import tariffs, while Vodafone is embroiled in a long-running legal battle over tax requirements. Such incidents highlight the challenges foreign companies face in India’s complex regulatory and tax framework.