Skoda-Volkswagen India faces Rs12,000-cr tax evasion charge

Customs authorities in Maharashtra have slapped Skoda-Volkswagen India with a Rs12,000 crore charge for import duty evasion through falsification of import documents.

The charges could double to Rs24,000 crore along with interest on the amount due, say reports.

In the tax evasion notice, the customs authorities said the company had been under reporting its imports by misclassification and misdeclaration of imported components for its Skoda, Volkswagen, and Audi vehicles. 

Reports citing customs authorities said Skoda Auto Volkswagen India used to import the entire parts of their cars for assembling in India, declaring these as parts that are not manufactured in India.

This, reportedly allowed the car maker import all parts of the car at lower duty of 5-15 per cent against the 30-35 per cent duty to be paid for imports of cars under completely knocked down (CKD) form.

According to the customs authorities, almost all models like the Skoda Kodiaq, Superb, Audi A4, Audi Q5, and Volkswagen Tiguan were imported this way to circumvent customs duty. 

As per the tax notice issued by the Commissioner of Customs, Maharashtra, the imports were classified into separate batches to avoid scrutiny and to evade higher duties. The customs estimate $1.36 billion underpayment of duty over a 10-year period.

As per the notice, Skoda Auto Volkswagen India should have paid $2.35 billion in import taxes between 2012 and 2024 but has only paid $981 million so far.

The duty avoidance invited a penalty of a like amount, which takes the company’s total tax liability to $2,8 billio (around Rs24,000 crore).

Skoda-Volkswagen India, however, said the company has been complying fully with all tax laws and regulations. The company said it is studying the notice and is fully cooperating with the customs authorities.