India's $1.4 billion tax demand is taking a focus on the national policy of companies to foreign companies, which is global businesses are paying attention to the expansion of the world's fastest-growing major economies.
It's a Japanese company Work hard to reduce their dependence on China or global airline companies Hope to get rid of the Western supply chain crisisIndia is quickly becoming a major destination for its business.
But the country's quarrel with German auto giant Volkswagen, amid a record $1.4 billion tax demand, was also the focus of this month, after the automaker sued authorities for a “impossible” amount.
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Lawyers for the company's Indian division on Monday Tell the local court If Volkswagen India is to pay all required taxes and fines (total $2.8 billion), the company employs 6,000 locally and may not be able to survive in India.
“This is a matter of life and death,” Volkswagen Indian lawyer Arvind Datar said in the Mumbai Court of Indian Financial Capital.
What is the Volkswagen case?
Indian tax authorities say huge demand is the result of Volkswagen's tax evasion in 12 years, during which automakers split imports of some Volkswagen, Skoda and Audi cars into many separate parts to pay for lower responsibilities .
They claimed that Volkswagen imported “almost the entire car” without assembly, which should attract a tax of 30-35% for CKD, or a “complete knockdown” unit, but by mistakenly thinking it's “single part” Upcoming taxes. In separate goods, only 5-15% tax is required.
Meanwhile, in a lawsuit against officials, Volkswagen India said it had informed the Indian government of its “partially import-by-one” model and received clarification in 2011.
Tax notices “completely contradict the position held by the government… (and) position of dangerous beliefs and trust basis, foreign investors wish to act and assurance in action and assurance basis”, filed by the court on January 29.
What are the tax issues in India?
In the highly competitive automotive industry, Volkswagen is not alone in facing tax scrutiny. Automakers such as Maruti Suzuki, Hyundai, Honda and Toyota face disputes over revenue taxes, customs and other payments, Reuters analysis shows.
Long tax investigations into the country have also attracted attention, which often triggers years of litigation.
In a compelling incident, telecom company Vodafone won a retrospective Indian tax demand of $20 billion after more than a decade of legal battle with New Delhi, including the Hague International Arbitration.
“This situation can prevent foreign companies from making large investments in India,” Ameya Dadhich, tax partner at global law firm DLA Piper, told Reuters.
Government data shows that in November 2024, total arrears for service tax, customs and excise tax were nearly $53 billion, with 70% of the disputed lawsuits.
In the category of import tariffs or customs disputes alone, India's tax requirements reached US$4.5 billion by March 2024, with one-third of them requiring more than five years.
In opposition to the Indian authorities and the masses Criticize officials To spend years reviewing cargo records, their “inaction and delay” dates back to 2012.
Volkswagen said it could challenge the move or reevaluate its import strategy if New Delhi ended its comments earlier, but tax notices will now be “at risky on the basis of faith and trust” that foreign investors are eager for.
Why is this important?
The public expressed concerns with the growing push for protests against foreign investors by Prime Minister Narendra Modi and promised to simplify regulations and remove bureaucratic barriers.
Modi wants to turn India into a manufacturing hub, but many electronics and automotive companies rely on parts for high-end cars or smartphones that use parts that often inspire investigations.
India's frequently criticized tariff policy has also been re-examined after U.S. President Donald Trump's threat of reciprocity taxes, who called the country a “very big abuser” in trade.
Last week, Modi flew to Washington with a promise of lower tariffs and a better trade deal to avoid reciprocal tariffs.
He also met Trump's close aide Elon Musk, then Musk's electric car company Tesla Start hiring senior staff in India This week.
Tesla has planned to enter India for many years, including the establishment of a local manufacturing plant. But it has retroactively retroactive these plans every time after invoking high Indian tariffs. Imports of fully built luxury cars face Indian taxes and taxes of about 100%.
So while Tesla's new interest in India will show progress through talks with Modi, the Volkswagen case could spark another skepticism and force foreign companies to reevaluate their plans to invest in the country.
The direct impact of the Volkswagen case is that tax consultants and attorneys are now asking clients nervous questions about how years-old tax cases will come back to bother them.
Client wants to know the “Fate of Shipping Reviews”, a lawyer Tell Reuters.
- Reuters, other editors and inputs with Vishakha Saxena
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