Volkswagen India gets $1.4 billion tax evasion notice by Centre: Report

The Centre on Friday issued a $1.4 billion ( ₹11,842 crore) notice to German auto giant Volkswagen for allegedly evading taxes by “wilfully” paying lesser import taxes on components for its Audi, VW and Skoda cars, Reuters reported.
According to the notice quoted by Reuters, Volkswagen used to import “almost the entire car” in an unassembled condition, which attracts a 30-35 per cent import tax in India for completely knocked down (CKD) units. The company allegedly evaded levies by “mis-declaring and mis-classifying” those imports as “individual parts”, paying just a 5-15% duty.ALSO READ: ED arrests Bengaluru man for Income Tax returns, refund ‘fraud’
According to the Reuters report, the notice alleged that imports were made by Volkswagen’s India unit, Skoda Auto Volkswagen India, for its models including the Skoda Superb and Kodiaq, luxury cars like Audi A4 and Q5, and VW’s Tiguan SUV. Different shipment consignments were reportedly used to evade detection and “willfully evade payment” of higher taxes.
“This logistical arrangement is an artificial arrangement … operating structure is nothing but a ploy to clear the goods without the payment of the applicable duty,” said the 95-page notice issued by the Office of the Commissioner of Customs in Maharashtra, accessed by Reuters.
The company’s India unit should have paid import taxes and several other related levies of about $2.35 billion to the Indian government, but paid only $981 million, amounting to a shortfall of $1.36 billion.
In a statement, Skoda Auto Volkswagen India said 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.”
The notice asks to respond within 30 days, but Volkswagen didn’t comment if it has done so or not.
The finance ministry and the customs department did not respond to Reuters queries.
The so-called “show cause notice” issued by the government authority asks Volkswagen’s local unit to explain why its alleged tax evasion should not attract penalties and interests under Indian laws, over and above the $1.4 billion evaded duties.
A government official who spoke on condition of anonymity said the penalty typically in such cases, if the company is found guilty, could go as high as 100% of the amount evaded, which could force the company to pay up about $2.8 billion in total.