The Indian government has issued a notice to German car major Volkswagen, demanding $1.4 billion or approximately ₹11,842 crore, as compensation for allegedly dodging duty payments by deliberately underreporting import duties on parts meant for its Audi, Volkswagen, and Skoda brands of vehicles.
According to reports, the notice says Volkswagen imported almost completely knocked-down cars in unassembled form, which attracts import taxes of 30-35% for CBU units in India. However, the company is accused of mis-declaring these imports as individual parts and paying significantly lower duties of only 5% to 15%.
The notice, as reported by Reuters, names Volkswagen’s Indian unit, Skoda Auto Volkswagen India, importing for several models, including the Skoda Superb, Kodiaq, Audi A4, Q5, and VW Tiguan SUV. It alleged that different shipment consignments were used to evade detection and “willfully evade payment” of the applicable higher taxes.
“This logistical arrangement is an artificial construct. and the operating structure is merely a ploy to clear goods without paying the required duties,” the 95-page notice from the Office of the Commissioner of Customs in Maharashtra said, as accessed by Reuters.
The notice estimates that the India unit of Volkswagen, on one estimate, owes about $2.35 billion in import taxes and other levies to the Indian government and has allegedly paid only $981 million, leaving a shortfall of $1.36 billion.
Skoda Auto Volkswagen India replied that it is a “responsible organization, fully complying with all global and local laws and regulations.” The Company said it is studying the notice and will cooperate fully with the authorities.
The notice allows Volkswagen 30 days to respond, but the company has not confirmed that it has done so. Queries directed at the finance ministry and customs department went unanswered.
The order, a so-called “show cause notice,” directs Volkswagen’s local unit to explain why the alleged evasion shouldn’t be subject to penalties and interest under Indian law on top of the $1.4 billion in evaded duties. A government official, who asked not to be identified, said the penalty could be as high as 100% of the amount evaded if guilt is established, taking the total liability to about $2.8 billion.
