India says quashing Volkswagen's $1.4 billion tax bill would be 'catastrophic'

Arpan Chaturvedi and Aditya Kalra

Sat, Mar 22, 2025, 11:48 PM 3 min read

By Arpan Chaturvedi and Aditya Kalra

NEW DELHI (Reuters) - India's authorities has told a tribunal successful Mumbai that agreeing to Volkswagen's request to quash a $1.4 cardinal taxation measure would person "catastrophic consequences" and promote companies to withhold accusation and hold inquiries, tribunal documents show.

India's highest-ever request for backmost taxes related to import duties came aft scrutiny of 12 years of Volkswagen shipments and has rekindled overseas investors' fears implicit lengthy investigations. The automaker has described the lawsuit arsenic a "matter of beingness and death" for its India business, and is warring the taxation authorization successful the precocious tribunal successful Mumbai.

Volkswagen unit, Skoda Auto Volkswagen India, faces allegations that it misclassified constituent imports of immoderate Audi, VW and Skoda cars to evade higher tariffs. Its cardinal statement to quash the taxation request is the "inaction and tardiness" of taxation officials successful delaying shipment reviews.

The Indian taxation authorization told the precocious tribunal successful a 78-page rebuttal that Volkswagen caused the delays by withholding important accusation and information astir its imports.

Accepting the carmaker's reasoning would let importers to suppress captious accusation and past assertion that the time-limit for the taxation authorization to behaviour a probe had passed, the authorization said successful its March 10 filing, which was not nationalist and is being reported for the archetypal time.

This would person "catastrophic consequences", they said successful the filing.

The lawsuit volition beryllium heard connected Monday. Volkswagen and the Indian authorities did not respond to requests for comment.

Volkswagen is simply a tiny subordinate successful India's car market, which is third-biggest successful the world, and its Audi marque lags luxury peers specified arsenic Mercedes and BMW. If recovered blameworthy it could look a taxation measure of $2.8 billion, including punishment and delayed interest.

Prime Minister Narendra Modi has been courting overseas investors with promises of simpler regulations and little bureaucratic hurdles, but lengthy taxation investigations that tin trigger lawsuits stretching implicit years stay a sore point.

Had New Delhi wrapped up its reviews earlier, Volkswagen has said, it could person challenged the findings oregon re-evaluated its import strategy. The taxation announcement sent successful September 2024 puts "at peril the precise instauration of religion and trust" overseas investors desire, it said.

In the latest authorities filing, the taxation authorization argues Volkswagen was submitting "information and documents critically required for" completing shipment reviews "only successful tranches".