Volkswagen sues India to quash ‘enormous’ $1.4 billion tax demand, legal filing shows

Volkswagen sues India to quash ‘enormous’ .4 billion tax demand, legal filing shows


Volkswagen logo is fixed by an employee on a production line for the Golf VIII and Tiguan cars at the VW headquarters in Wolfsburg, Germany May 23, 2024. 

Fabian Bimmer | Reuters

Volkswagen has sued Indian authorities to quash an “impossibly enormous” tax demand of $1.4 billion, arguing the ask is contradictory to New Delhi’s import taxation rules for car parts and will hamper the company’s business plans, court papers show.

Volkswagen’s unit, Skoda Auto Volkswagen India, also told the High Court in Mumbai the tax dispute puts at risk its investments of $1.5 billion in India, and is detrimental to the foreign investment climate, according to the 105-page filing which is not public but was reviewed by Reuters.

In the biggest ever import tax demand, India in September slapped a $1.4 billion tax notice on Volkswagen for using a strategy to break down imports of some VW, Skoda and Audi cars into many individual parts to pay a lower duty.

Indian authorities alleged Volkswagen imported “almost the entire” car in unassembled condition – which attract a 30-35% tax applicable on CKDs, or completely knocked down units, but evaded the levies by misclassifying them as “individual parts” coming in separate shipments, paying just a 5-15% levy.

Volkswagen India had kept the Indian government informed of its “part-by-part import” model and received clarifications in its support in 2011, the company says in the court challenge.

The tax notice is “in complete contradiction of the position held by the government … (and) places at peril the very foundation of faith and trust that foreign investors would desire to have in the actions and assurances” of the administration, the Jan. 29 court filing states.

The Indian finance ministry and the customs official who issued the demand order did not respond to requests for comment outside regular business hours.

Volkswagen’s India unit said in a statement it is using all legal remedies as it cooperates with authorities and remains committed to ensuring “full compliance” with all global and local laws.

A Volkswagen spokesperson in Germany did not respond to a request for a comment.

The German carmaker is a tiny player in India’s 4 million units a year car market, the world’s third biggest, where its Audi brand also lags competitors in the luxury segment like Mercedes and BMW.

A government source earlier told Reuters that with penalties, Volkswagen India may have to pay about $2.8 billion if it loses the dispute. In 2023-24, VW India reported sales of $2.19 billion, and a net profit of $11 million.

The tax dispute comes at a time when Volkswagen is battling to cut costs to better compete with Chinese rivals and cope with weak demand in Europe. In December it announced 35,000 future job cuts in Germany. In its biggest market, China, the carmaker has said it will sell some of its operations.

‘Body blow’ for investor sentiment

Volkswagen argues it is not liable to pay higher taxes as it did not import car parts together as a single “kit”, but instead shipped them separately, combining them with some local components to make a car.

To explain what a “kit” is, it refers to a “practical analogy” of buying a chair online from Amazon, which is then delivered in one shipment with all parts and fixtures needed to assemble the piece of furniture.

In the case, authorities alleged Volkswagen’s local unit regularly placed bulk orders for cars through internal software which connected it to suppliers in Czech Republic, Germany, Mexico and other nations.

And after the order was placed, the software broke it down into “main components/parts”, roughly 700-1,500 for each vehicle depending on the model, which were shipped separately over time.

This, the Indian authorities said, was “a ploy to clear the goods without the payment of the applicable duty.”

The company says in the court filing “there is no exclusive utilization of the parts towards manufacture of one specific car.”

Volkswagen India also contests the alleged clandestine software use by arguing it only helps dealers convey car orders so that it can track “consumer demand at a macro level”.

High taxes and prolonged legal disputes have often been a sore point for foreign companies in India, with Tesla also publicly complaining about high taxes on imported EVs.

The tax notice “deals a body blow” to the much-advertised “policy of ease of doing business in India for foreign investors,” the company said.

The High Court in Mumbai is due to start hearing the case on Feb. 5.



Source

India to maintain Russian oil imports despite Trump threats, government sources say
World

India to maintain Russian oil imports despite Trump threats, government sources say

Russia’s President Vladimir Putin (R) speaks with India’s Prime Minister Narendra Modi (L) during a visit to the shipyard Zvezda, as Rosneft Russian oil giant chief Igor Sechin (C) accompanies them, outside the far-eastern Russian port of Vladivostok on September 4, 2019, ahead of the start of the Eastern Economic Forum hosted by Russia.  Alexander […]

Read More
U.S. envoy tells Israeli hostage families he is working on plan to end Gaza War
World

U.S. envoy tells Israeli hostage families he is working on plan to end Gaza War

U.S. envoy Steve Witkoff (L) arrives to meet families of Israelis held hostage by Palestinian militants in the Gaza Strip since October 2023 as they demonstrate in Tel Aviv’s ‘Hostage’ square on August 2, 2025. Witkoff met the anguished families as fears for the captives’ survival mounted almost 22 months into the war. – | […]

Read More
How Florida quietly surpassed California in solar growth
World

How Florida quietly surpassed California in solar growth

Solar energy is booming across the U.S. and, for the first time, Florida is catching up to industry powerhouses Texas and California. Despite removing climate change from its official state policy in 2024, Florida added more utility-scale solar than California last year, with over 3 gigawatts of new capacity coming online.  “This is not a […]

Read More