BMW may face Rs650 cr penalty for ‘cheating’ on Indian taxes
09 May 2013
The Central Board of Excise and Customs is preparing to slap a Rs650 crore tax demand on German luxury car maker BMW on the ground that it imported semi-knocked down cars but paid duty on the basis of completely knocked down cars.
The terms SKD and CKD are uniquely Indian with the country's highly layered duty system. A completely knocked-down car (CKD) implies that only the parts are imported and the car is wholly built in India. This attracts lower taxes than SKD cars, which are largely assembled abroad before being shipped to India.
The customs duties on SKD and CKD vehicles are 30 per cent and 10 per cent respectively.
Tax authorities in Chennai, where BMW has its Indian plant, have seized a shipment of BMW engines and transmission equipment worth Rs25 crore, according to a Reuters report.
A BMW spokesman in Germany confirmed that India is investigating whether the parts that have been shipped are CKD or SKD. The spokesman denied that a shipment had been seized. He said that BMW is cooperating with local authorities.
BMW opened its Tamil Nadu factory near Chennai in 2007 to take advantage of a rising and aspirational upper class car market. Many of the parts, including engines, gearboxes and transmission equipment, are imported and assembled in India.