India has taken legal action against Volkswagen, claiming that the automaker has avoided paying $1.4 billion in taxes by allegedly underreporting import duties on components used for its popular brands like Audi, VW, and Skoda. The Indian authorities assert that Volkswagen imported nearly entire cars in unassembled form, thereby attracting a lower import tax rate compared to fully assembled vehicles. The notice issued on September 30 alleges that Volkswagen intentionally misclassified these imports as “individual parts,” allowing the company to pay significantly lower duties ranging from 5-15 percent instead of the required 30-35 percent for completely knocked down (CKD) units.
According to the investigation, Volkswagen's local unit, Skoda Auto Volkswagen India, imported components for various models like Skoda Superb, Kodiaq, Audi A4 and Q5, and VW Tiguan SUV. The company allegedly used different shipment methods to evade detection and avoid paying the higher taxes. The Office of the Commissioner of Customs in Maharashtra issued a comprehensive 95-page notice, describing Volkswagen's logistic arrangement as an artificial ploy to evade applicable duties.
The Indian government claims that Volkswagen's India unit should have paid $2.35 billion in import taxes and related levies since 2012. However, the company only paid $981 million during this period, resulting in a significant shortfall of $1.36 billion, as per the authorities. In response, Skoda Auto Volkswagen India emphasized its commitment to compliance with global and local laws, stating that it is currently studying the notice and collaborating with the authorities to address the allegations. The notice requires Volkswagen’s local unit to provide explanations to avoid facing penalties and interest under Indian law, in addition to the $1.4 billion in allegedly evaded duties.