Volkswagen has filed a lawsuit against Indian authorities over what the brand describes as an “impossibly enormous” tax demand, according to a new report from Reuters — a bill of $1.4 billion.
The demand stems from the automaker’s alleged importation of car “kits,” in which vehicles are assembled in large pieces to avoid being imported as a ready-to-drive vehicle. The Indian government says that the automaker has stepped afoul of taxation duties by utilizing that process; VW maintains that position is contradictory to the current regulations, according to Reuters, and could impact the brand’s business plans in the country.
The import tax demand, which was first applied to Skoda Auto Volkswagen India back in September, is the largest in Indian history. The Indian government states that the automaker mislabeled nearly-assembled vehicles as individual parts during importation, rather than the more appropriate “completely knocked down unit” (CKD) marker. These two categories face massively different tax levies: parts face around a 5º15% hit, but that figure jumps to 30–35% for CDK units, which is where the Indian government says VW is on the hook.
The Indian government further argues that the brand’s ordering software would automatically break vehicle orders down into component batches, measuring as many as 1500 parts per vehicle. These batches of parts would then allegedly be imported to skirt duties before being assembled into vehicles.
VW’s India branch disagrees with the assessment of the situation, and argues in private 105-page court documents seen by Reuters that it had previously informed the Indian government of its “part-by-part import” model, and even received clarification regarding the government’s support of the process in 2011. Furthermore, the automaker maintains that it did not import CDK units, but rather combined large numbers of parts with local components to produce complete vehicles.
If Skoda Auto Volkswagen India were to lose in court, the automaker could be on the hook for $2.8 billion, with the included penalties. It’s not surprising that the automaker would like to avoid that sort of payment — especially when you consider that the company made just $11 million in net profit in India during 2023–2024.
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