India has taken legal action against Volkswagen, alleging that the car manufacturer evaded taxes totaling $1.4 billion through deceptive practices related to importing components for its vehicles. The Indian authorities issued a notice dated September 30, detailing how Volkswagen allegedly misreported imported cars as unassembled parts to benefit from significantly lower import tax rates, a scheme that has led to a substantial shortfall in tax payments to the government since 2012.
The investigation revealed that Volkswagen's Indian unit, Skoda Auto Volkswagen India, utilized a scheme where whole cars were imported in parts to avoid the higher taxes applicable to completely assembled vehicles. The allegations suggest that Volkswagen intentionally used different shipment methods to evade detection and pay lower import duties, resulting in a huge discrepancy between the actual taxes owed and those paid to the Indian government. The notice issued by the Office of the Commissioner of Customs in Maharashtra described Volkswagen's operational tactics as an artificial arrangement aimed at circumventing tax obligations and highlighted the company's failure to meet its financial duties to the Indian authorities.
Volkswagen has come under intense scrutiny from Indian officials for what is perceived as intentional tax evasion practices pertaining to the importation of their popular car models. The Indian government has demanded an explanation from Volkswagen's local unit on why penalties and additional interests should not be imposed under Indian law, besides the $1.4 billion in import duties that have allegedly been evaded. The German automaker, through its Indian subsidiary, Skoda Auto Volkswagen India, maintained its innocence by declaring compliance with international and domestic laws and is currently reviewing the notice while working closely with the investigating authorities to address the accusations brought forward.