Indian tax authorities are turning up the heat on Skoda Auto Volkswagen as the company is accused of wrongly classifying its car import for the last 12 years to evade $1.4 billion in taxes. According to a Reuters report, officials noted that this isn’t the first time an automobile manufacturer has been flagged for such practices. Recently, Kia received a similar notice and promptly adjusted its approach.
Matter of life and death for Volkswagen in India
Has Skoda Auto Volkswagen found itself caught between a rock and a hard place? We’ll find out soon, but in the meantime, the Bombay High Court has instructed the Customs Department to file an affidavit by March 10, providing an explanation as to why the $1.4 billion tax demand should not be considered time-barred.
Volkswagen has described the situation as a ‘live and death’ matter for the company, warning that if found guilty, it could face penalties and delays amounting to up to $2.5 billion. It will be the highest tax demand in India’s history. According to Reuters, tax authorities listed ten carmakers, from Mercedes-Benz, BMW and Hyundai that correctly classified their imports, despite using “split consignments” to bring in parts.
Skoda Auto Volkswagen has questioned why it took the authorities 12 years to review the shipment records. However, officials explained that the delay was caused by the company’s failure to provide the necessary documents in a timely manner.
Kia falls in line
According to Reuters, the authorities accused Kia of evading $155 million in taxes by classifying direct import components as completely knocked down (CKD) units. The authorities told the court that Kia has corrected its course though the automobile manufacturer continues to contest the tax demand of $155 million. According to the authorities, it found the Kia Carnival was classified as being imported as components via the CKD route.Â
