Volkswagen is challenging a $1.4 billion tax demand over the alleged undervaluation of auto imports.
The Mumbai High Court will constitute a new bench to hear the case at a later date.
Indian tax authorities allege that Volkswagen mis-declared imports over a 12-year period to pay lower taxes.
Volkswagen’s $1.4 Bn Tax Battle In India Gets A Fresh Hearing
The Mumbai High Court will rehear Volkswagen’s challenge to a $1.4 billion tax demand after the earlier bench could not deliver its verdict within the stipulated time
Summary
Advertisement
Volkswagen’s challenge to a $1.4 billion tax demand in India will be heard again after the Mumbai High Court said the earlier bench could not deliver its verdict within the stipulated time, according to a Reuters report.
Arguments in the case had concluded more than a year ago, but no judgment was delivered. The court has now decided to constitute a new panel of judges, which will hear the matter at a later date.
The dispute is one of the biggest tax cases involving a foreign automaker in India and comes as Volkswagen is in talks with a potential partner for its India operations. The unresolved case has also added pressure to the German carmaker’s business in the country.
Why India Is Seeking $1.4 Billion From Volkswagen
Indian tax authorities allege that Volkswagen mis-declared its auto component imports over a period of 12 years to reduce the taxes it had to pay.
Advertisement
According to the allegations, Volkswagen imported “almost the entire” vehicle in an unassembled form, known as completely knocked down (CKD) units, but declared the shipments as individual auto parts.
CKD units attracted a higher tax rate of around 30–35%, according to the allegations. By classifying the imports as separate components, authorities say Volkswagen avoided paying the higher rate and incurred tax dues of about $1.4 billion.
Volkswagen has defended its import practices and challenged the tax demand in court.
Why The Case Matters For Volkswagen
The carmaker has described the dispute as a major threat to its India business, calling it a matter of “life and death” for the company. It has also warned that the case could hurt India’s efforts to make it easier for foreign companies to do business in the country.
Volkswagen has been present in India for around two decades but remains a relatively small player in the country’s automobile market. The tax dispute has therefore become an important issue for its future operations.
Advertisement
The case has also raised concerns among investors about the time taken to resolve major tax disputes in India. The latest decision means Volkswagen will have to wait longer for a final verdict as a new panel prepares to hear the case.