- The carmaker apparently only declared the importation of individual vehicle parts and not complete unassembled cars.
- VW could be hit with fines and penalties as high as 100%.
Tax authorities are not happy with Volkswagen in India, alleging that the company evaded $1.4 billion in taxes by improperly declaring vehicle parts from the Audi, VW, and Skoda brands.
In India, unassembled vehicles imported into the country attract 30-35% tariffs, and while VW was allegedly importing unassembled cars, it only declared these imports as “individual parts,” meaning it only copped 5-15% duties. Key vehicles imported to India by the carmaking giant include the Skoda Superb, Skoda Kodiaq, VW Tiguan, Audi A4, and Audi Q5.
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Investigators searched three of VW’s Indian facilities in 2022 and seized documents from top executives. Rather than importing vehicles as completely knocked down units (CKDs), VW India would allegedly place bulk orders for cars from suppliers in countries including the Czech Republic, Germany, and Mexico with special software that would break down these orders into “main components/parts.” Approximately 700-1,500 parts would be supplied for each vehicle, packed abroad, and shipped from different countries under multiple invoices into India.
The Office of the Commissioner of Customs says that VW’s Indian arm should have paid $2.35 billion in import taxes and related levies since 2012. However, it’s only paid $981 million. The government authority has now said VW must explain itself and provide reasons why it shouldn’t be hit with penalties and interest on top of the unpaid tariffs owed.
Speaking with Reuters, a government official said penalties in cases like these can reach as high as 100%. If this is applied to VW, it could be left owing the Indian government $2.8 billion. Such a fine would come at a horrible time for the German brand as it looks to slash jobs, cut wages, and close factories in Europe in response to rising costs and declining demand for its vehicles.
VW has denied claims it was attempting to limit the duties it had to pay, telling investigators it was using the complex ordering process for “efficiency of operations.” Moreover, Skoda Auto Volkswagen India stated that it is a “responsible organization, fully complying with all global and local laws and regulations. We are analyzing the notice and extending our full cooperation to the authorities.”
