India defended its record $1.2 billion tax demand against Volkswagen in a Mumbai court on Thursday, marking the latest chapter in a dispute that has been ongoing since 2024. According to reports from Business Standard, the case restarted last week after the High Court in Mumbai said in August it would hear Volkswagen's challenge afresh as judges failed to pass a ruling in time. The dispute centers on allegations that Volkswagen undervalued auto imports for years and paid below the full tariff rates.
As reported by Business Standard, Volkswagen's counsel Arvind Datar told the judges that India tax authorities could not have gone back 12 years in scrutinising its imports as Indian law allows officials to only go back up to the past five years. The government's Additional Solicitor General N. Venkataraman countered that Volkswagen didn't provide the information sought in time, adding that no other automaker in the country which imports parts had indulged in such misconduct. "No other company has challenged this," he said, emphasizing the unique nature of the case. The case will next be heard on Tuesday next week.
According to Business Standard, Volkswagen is accused of declaring its imports as individual auto parts and paid 5% to 15% tariff, though it was bringing in "almost the entire car" in unassembled condition for which it should have paid a 30-35% tax rate. The investigation has spooked foreign investors, as lengthy import tariff and tax cases have long been a sore point for companies and affected companies like Samsung and LG.
Volkswagen, which has a roughly 2% market share in the world's third biggest car market, denies the allegations and has previously said the case is a matter of "life and death" for its India business. As reported by Business Standard, the carmaker is currently in talks with India's JSW to sell a stake in its India operations, making this tax dispute a major overhang for the company's Indian operations. The dispute over India's biggest ever import tax demand has created significant uncertainty for the German automaker's operations in one of its key markets.
