Volkswagen India accused of £1.1 billion tax evasion

INDIA has issued a tax evasion notice to German carmaker Volkswagen, alleging that its local unit, Skoda Auto Volkswagen India, evaded import taxes totalling £1.1 billion.

The notice, dated 30 September, accuses the company of misclassifying imported car components to pay lower taxes, according to a document reviewed by Reuters.

It states that Volkswagen imported nearly complete vehicles in an unassembled state, which should attract a 30–35 per cent import duty under India's CKD (completely knocked down units) classification.

However, the company reportedly declared these imports as "individual parts" to pay a lower duty of 5–15 per cent. Models such as the Skoda Superb, Audi A4, and VW Tiguan were allegedly brought in using this method.

"This logistical arrangement is an artificial arrangement... operating structure is nothing but a ploy to clear the goods without the payment of the applicable duty," said the notice issued by the Office of the Commissioner of Customs in Maharashtra.

Volkswagen's shares fell by 2.13 per cent on the Frankfurt stock exchange following the news.

According to the Indian investigation, Volkswagen should have paid around £1.85 bn in import taxes and related levies since 2012 but only paid £773 million, resulting in a shortfall of approximately £1.1 bn.

In a statement, Skoda Auto Volkswagen India said it is "a responsible organisation, fully complying with all global and local laws and regulations. We are analysing the notice and extending our full cooperation to the authorities."

The notice allows 30 days for a response, but Volkswagen did not comment on whether it has replied.

Indian investigators allege that Volkswagen deliberately split car parts into multiple shipments to evade detection. Searches of the company's factories in Maharashtra in 2022 uncovered documents and emails related to these operations.

(With inputs from Reuters)