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Volkswagen India is under investigation for allegedly evading taxes worth $1.4 billion (₹11,842 crore), as the Centre issued a show-cause notice for the alleged misclassification of imports to avoid higher import duties. According to a report by Reuters, the notice was issued on Friday, alleging that Volkswagen’s India unit, Skoda Auto Volkswagen India, had been mis-declaring and mis-classifying parts of its cars, including luxury models like Audi A4, Q5, Skoda Superb, and Tiguan SUV, to evade tax payments.
The notice details that Volkswagen imported almost the entire car in an unassembled condition, known as Completely Knocked Down (CKD) units, which attract a 30-35% import tax. However, the company allegedly declared the components as “individual parts” to pay a lower duty of just 5-15%. The tax department claims that the company used different shipment consignments to evade detection, effectively reducing the taxes it owed by nearly half.
The government claims that Skoda Auto Volkswagen India should have paid approximately $2.35 billion in import duties and related levies, but the company paid only $981 million, resulting in a shortfall of about $1.36 billion.
In response, Skoda Auto Volkswagen India stated that it is a “responsible organization” and is fully compliant with both local and international laws. The company said it is reviewing the notice and cooperating fully with the authorities. However, the finance ministry and customs department have not commented on the matter.
The notice gives Volkswagen 30 days to respond, explaining why the alleged tax evasion should not result in penalties or additional charges, including interest under Indian tax laws.
This notice adds to the mounting scrutiny of global automakers operating in India, and highlights concerns over tax evasion practices in the automobile industry, with the Indian government ramping up efforts to ensure compliance with tax regulations.
Skoda Auto Volkswagen India is currently reviewing its next steps in the matter, as the investigation continues.
Sources By Agencies
