By Arpan Chaturvedi and Aditya Kalra
NEW DELHI (Reuters) – A court in Mumbai in India said agreeing to Volkswagen’s request to revoke the $1.4 billion tax bill would have “disastrous consequences” and encourage companies to withhold information and delay inquiries, court documents show.
India’s highest demand for tax deductions related to import taxes has rekindled concerns among foreign investors amid a lengthy investigation after reviewing Volkswagen shipments. The automaker has described the case as a “life and death issue” for its Indian business and is fighting the tax authorities in the Mumbai High Court.
Skoda Auto Volkswagen India’s Volkswagen unit faces charges that misrepresent some imported components of Audi, Volkswagen and Skoda Automobile to avoid higher tariffs. The main argument for eliminating tax demand is the “inaction and lateness” of tax officials when postponing the shipping review.
In a 78-page rebuttal, the Indian Taxation Agency told the High Court that Volkswagen caused delays by detaining key information and data about its imports.
Authorities said in a March 10 document that accepting automakers’ reasoning would allow importers to curb important information, and then claim that the time limit for conducting the investigation has been passed.
They said in the filing that this would have “disastrous consequences.”
The case will be heard on Monday. Volkswagen and the Indian government did not respond to requests for comment.
Volkswagen is a small player in the Indian auto market, the third largest player in the world, and its Audi brand lags behind luxury peers such as Mercedes and BMW. If found guilty, it could face a $2.8 billion tax bill that includes fines and delays in interest.
Prime Minister Narendra Modi has been courting foreign investors with simpler regulations and a promise to reduce bureaucratic barriers, but a lengthy tax investigation could spark extended lawsuits over the years.
Volkswagen said it could challenge these findings or reevaluate its import strategy if New Delhi ended its comments earlier. It said the tax notice issued in September 2024 would “hazardously become the basis of faith and trust” that foreign investors desire.
In its latest government application, the Revenue Agency argued that Volkswagen is submitting information and documents that “only complete shipment reviews in approval.”
