Volkswagen threatens, according to a document India a billion-dollar fine for tax evasion. The company has underpaid a total of almost $1.4 billion in import duties since 2012, according to a 95-page document from the Indian customs authorities dated September 30, which was seen by Reuters. VW knowingly violated customs regulations by sending the parts for the vehicles assembled in India in different shipments. In this way, VW claimed that the lower duty rate applied to individual parts, instead of a higher duty rate to finished kits. The logistics are an artificial procedure, a trick to import the goods without paying the applicable customs duties, the document says.
VW operates two plants in India where models from Skoda, Audi and VW are built. Skoda is in charge of the business in the Asian country. The company said it is a “responsible organization that fully complies with all global and local laws.” “We are investigating the note and expanding our extensive cooperation with the authorities.” The document asks VW to respond within 30 days. The company did not comment on whether it has submitted its response. India’s finance ministry and customs authorities did not immediately respond to a Reuters query.
Essentially, the question is whether VW imports complete kits into India, which are then finally assembled on site. This practice is known in the industry as Completely Knocked Down (CKD) production. According to Indian regulations, a customs duty of 30 to 35 percent applies in this case. For individual car parts, however, the duty rate is between 5 and 15 percent. According to the documents, VW should explain why it should not pay a penalty in view of the alleged tax evasion. If the company is found guilty, it could face a fine of up to $2.8 billion, according to an insider.