India and Volkswagen Clash in Court Over $1.2 Billion Tax Dispute
India and German automaker Volkswagen clashed in a Mumbai court on Thursday over a record $1.2 billion tax demand linked to alleged undervaluation of vehicle imports. Indian authorities claim the company paid lower import duties by declaring shipments as individual car parts rather than importing nearly complete vehicles in unassembled form. Volkswagen denies the allegations, arguing that the tax demand is excessive and was raised too late.
During the hearing, Volkswagen’s lawyer, Arvind Datar, argued that Indian law allows tax authorities to review imports only for the previous five years, not 12 years as in this case. The government countered that Volkswagen failed to provide the required information on time. Authorities allege that the company paid import duties of 5% to 15%, whereas the shipments should have attracted rates of 30% to 35%.
The dispute poses a significant challenge for Volkswagen’s operations in India, where it holds around 2% of the car market. The case also comes as the automaker explores a potential stake sale in its Indian business to the JSW Group. The prolonged tax dispute has raised concerns among foreign investors about India’s import duty regulations and lengthy tax litigation. The court is scheduled to hear the case again next Tuesday.
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