Volkswagen AG, the well-known German automobile manufacturer, has filed a lawsuit against Indian authorities over a steep tax demand of USD 1.4 billion, over ₹12,000 crore, due to it. According to a report by Reuters, the local unit, Skoda Auto Volkswagen India Pvt Ltd, told the Mumbai High Court that the threat of this much tax is looming over its investment of USD 1.5 billion in-country and will eventually discourage future foreign investments.
The Indian government slapped the tax notice on Volkswagen Group in September 2024, months after the company had put into place an import strategy to save on duties. In that strategy, the company can import parts of Volkswagen, Audi, and Skoda vehicles separately instead of being fully assembled.
Indian authorities have complained that Volkswagen was importing the cars in “kit” form without assembling them fully, which then allowed the carmaker to declare the shipments as “individual parts” that came under a tax rate of 5-15 percent. Indian authorities counter the vehicles must be considered CKD units and taxed at 30-35 percent.
In its court defense, Volkswagen India said it had kept the Indian government in the loop about its “part-by-part import” strategy and had received clarifications supporting this approach as far back as 2011.
The Volkswagen Group said the tax notice is in contravention of the written stances adopted by the government and undermines the confidence foreign investors have in the actions and statements of the administration. The Ministry of Finance and customs officials who issued the demand order have so far declined to comment on the matter, as has a Volkswagen spokesperson in Germany.
Volkswagen India, meanwhile, promised to continue to cooperate with the authorities while pursuing all avenues of law, saying it was “committed to full compliance” with all global and local regulations.
