Volkswagen Sues Indian Authorities Over "Impossibly Enormous" $1.4 Billion Tax Demand
Volkswagen has filed a lawsuit against Indian authorities, contesting a massive $1.4 billion tax demand that the company claims violates import taxation rules and jeopardizes its business operations in India.
Tax Dispute Threatens Investments
According to the 105-page court filing, Volkswagen's subsidiary, Skoda Auto Volkswagen India, alleges that the tax notice places its $1.5 billion investments in India at risk and undermines the foreign investment climate.
Import Tax Allegations
In September 2022, Indian authorities imposed a $1.4 billion tax notice on Volkswagen, accusing it of intentionally breaking down imports of VW, Skoda, and Audi cars into individual parts to reduce customs duties.
Volkswagen's Defense
Volkswagen maintains that its "part-by-part import" model was fully disclosed to the Indian government and received official approval in 2011. The company argues that it did not import completed cars but rather assembled them using both imported and locally sourced components, which should be taxed at a lower rate.
Legal Implications
The tax dispute has severe implications for Volkswagen's operations in India, with government sources estimating that the company could face penalties totaling $2.8 billion if it loses the case.
Industry Concerns
The tax notice against Volkswagen highlights broader concerns among foreign companies operating in India regarding high taxes and legal disputes. Tesla, for example, has publicly criticized the high import taxes on electric vehicles in the country.
Court Hearing
The High Court in Mumbai is scheduled to begin hearing the case on February 5th, 2023. The outcome of the legal proceedings will determine the fate of Volkswagen's operations in India and serve as a precedent for other foreign investors.