India has demanded that Volkswagen pay $1.4bn in taxes
Volkswagen Group's subsidiary in India may be on the brink of survival due to a tax dispute with the country's authorities. India is demanding that the company pay $1.4 billion, accusing it of a scheme to evade customs duties.
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The Indian tax department alleges that Skoda Auto Volkswagen India imported nearly finished cars but cleared them as separate parts. This allowed the company to pay lower duties - 5-15 per cent instead of 30-35 per cent. As a result, the tax department issued a bill to Volkswagen demanding payment of taxes for the last 12 years.
The company's lawyer Arvind Datar said in court that if the Volkswagen unit has to pay the entire amount along with penalties, which is already $2.8 billion, the business will simply not survive.
India is the third largest car market in the world, after China and the US. Meanwhile, Volkswagen's share in the country is relatively small, with its premium Audi brand behind Mercedes-Benz and BMW. However, the case may not only affect VW but also other multinational companies that are planning to invest in the local auto industry. Skoda Auto Volkswagen India approached the court last month, arguing that the tax demands would hamper business plans and damage the foreign investment climate.
Source: Reuters
