[mack.mehul]

In my opinion, any wrongdoing on the part of Volkswagen group cannot be ruled out as they have already been held guilty of installing cheat devices in their diesel cars. However even the GOI instead of going all out against Volkswagen group could try exploring the middle path to sort out the problem. In anycase, no corporate company is a holy cow and every company bends the rules/law of the land at some or the other point of time.

[Akmal]

Whether VW was compliant or not is for the law to ultimately decide. The burn is also that the country has been paying CKD levels of price for select VW group cars that they have been importing as parts. Now imagine the consumer net price if they had declared the import as CKD from the start and paid that 20% higher applicable tax.

[volkman10]

Originally Posted by CARDEEP

-- It is matter of days when they would just make an announcement to pack up.

Unfortunately, we will miss their superior DCT gearboxes & much better build + ride combo.

It is not that VAG group exiting the country will cause any ripple to the Indian auto industry BUT it is the reputation the country will carry going forward on doing business.

After VW, there is now Kia in a similar dispute of tax evasion.

Foreign companies in India face headaches from high taxes and long-drawn-out investigations.

Tax woes mount for foreign automakers in India
Kia privately contests India tax evasion demand, sources say
Accusations similar to VW case on import of auto parts
Kia India action covers Carnival model, notice show

Link:

[buzzy_boy]

IMHO, we should all refrain from passing judgements one way or the other. It is the duty of the Courts to decide on two questions:

1. Whether or not VW did what they are being accused of doing
2. If they did, whether or not their interpretation of law is correct.

If the Courts find them guilty on both counts, they should pay up.

I hope that the matter is resolved soon for the sake of the company, its employees, existing & prospective customers, and tax paying citizens.

[Nithesh_M]

Maybe KIA and VW can magically make this issue go away if they just agreed to tie up with some influential big local businesses here. It worked for MG Motors who are no longer Chinese spies working for Chinese govt using "Internet inside" technology.

[Kishoreshack]

Originally Posted by Nithesh_M

VW does not seem to mince words with this one. Literally called out the govt and its claims of being "foreign investor friendly".

Maybe this explains the reluctance of other foreign manufacturers from adding more models to their dwindling lineup here.

Authorities should be vigilant enough to detect and prevent any wrongdoing immediately, rather than allowing misconduct to continue unchecked for years. However, when the government itself becomes complicit in these wrongdoings—turning a blind eye for two to three years, permitting violations to occur, and then extorting money after a decade—it is not just negligence but outright corruption and injustice. Govt is in hand in glove with such corruption

[L8ButV8]

This will have an immediate and devastating impact on VW's India business. All future imports will be provisionally classified, requiring bank guarantees. Essentially the $1.4B claim will rapidly grow as the case drags on. If the case goes against VW, each sale made in the interim will land in a big loss. They might just shut shop/scale back/increase prices.

We should not underestimate the power of the components lobbies, who have an incentive to push out global players and their imported components (including Adani, Vedanta, JSW, Hindalco/Birla, Megha Engineering, Motherson Group etc). The clout they hold within Customs should not be underestimated. I am not including Tata & Mahindra in this list as they have both played relatively clean in the past.

Anyone who has dealt with industrial imports/ customs would appreciate that classifications are often vague, adjudicating officers rarely consider the best interest of the economy/country, and there is rampant harassment. While I haven't gone through the HS codes/ case law involved here, I am very skeptical this is an open shut case, or that the motivations are all clean.

VW's history of deception does not help them, or instill trust. However now Kia is also included, and in one swoop the major foreign brands are all under the gun. The ones left have a minor presence barring Toyota -- i.e luxury brands/Honda/Nissan/Citroen.

[vamsi.vadrevu]

If a car model has 1 or 2 imported components it wouldn't be considered CKD.

If a car has 200 to 300 components imported, would it be considered as CKD? (A car has about 30000 individual components)

What percentage of a car's components determine its status as CKD or Made in India (with parts sourced from outside)

If there's ambiguity about this and if VW can prove it, they might win. Ideally Indian government should have sent notices of breach of compliance long before they slapped the fine.

Indian government is indeed not acting in the spirit of "foreign investor friendly nation". If they found non compliance earlier, they should have notified before. Instead slapping a retroactive fine feels like a money grab initiative rather than actual penalty. Do they aim to teach a lesson to foreign companies? What's the point of such high penalty. To dissuade future non compliance from other foreign companies. To show who's the boss?

One could argue that the lack of awareness or understanding of the law doesn't give VW the right to do this. However government and judiciary is extremely quick to release and pardon seriously malicious crimes (every saint has a past and every sinner has a future) but will behave in a draconian manner with businesses who are here to make a living.

The amount of fine is entirely unfair too.

If VW looses this case, it will indeed set a precedent for foreign investors and they'll be afraid to invest.

It's not like the government is doing anything useful with all the taxes we're giving them. Might as well throw all that money down the drain.

The GOI is behaving exactly like the British Raj when we were under colonial rule. They'd leave all the serious crimes and focus on penalizing on crimes that impacted the British Raj's income. Thievery and loot of government property was considered a greater sin than attacking a fellow human being.

If the judiciary upholds the fine, then we'll know that they're not serious about truly improving Indian economy or the quality of life of Indians (which I already think is the most likely outcome). It'll be sad to see another manufacturer go from the Indian automobile market. Sad but inevitable.

[handsofsteel]

Based on my limited understanding of this case, I am with the government on this one. As a member of the salaried class, I wonder why the hue and cry for a manoeuvre blatantly designed to evade/ minimise taxes by exploiting loopholes. Agreed it's a profit driven economy and every singly loophole will be found and exploited (fair enough, they were laughing their way to the bank so far). Ease of doing business doesn't mean knowingly/ unknowingly cocking a snook at the laws of the land. I agree heads will roll and maybe somebody will exit the country but so be it. I understand this is an auto forum but surely this is misplaced sympathy? I do agree that : -

1. Delay in catching this evasion is solely the authority's and therefore the amount of 'interest component' may not stand legal scrutiny.
2. The figure would be eye-catchingly large and ultimately be pared down post negotiations/ quid pro quo.
3. Any ambiguity in the letter of the law can always be argued before a court (Vodafone did take the GoI to court, for a different reason though, and win its case there).

While it is always 'innocent till proven guilty', given VW's track record, I am not too optimistic.

[V.Narayan]

With reference to both the Volkswagen case and the Kia case the complexities of interpretation are too many to jump to simplistic conclusions of OEM bad Govt good boy or vice versa. We had a similar case between Nissan and {I think} the Tamil Nadu State Govt over concessions and almost the whole of Team BHP declared the State Govt guilty. Later events proved the State correct.

First our indirect tax laws are almost always too complex and interpreting them can lead to two correct answers. The framing of indirect laws can be at cross purposes to the way manufacturing, flow of goods, etc actually functions in the real world. Second it is possible either or both OEMs may have sought an advance ruling prior to commencement of production/assembly in India. If so it would be necessary to read what those advance rulings stated. Third it can be very messy determining which bolt that came in as an import was a part of an alleged CKD versus which one was a part to be sold for maintenance versus which one was to be used in a car that is almost entirely being manufactured in India but only has a limited import component. Fourth the tax authorities have become almost irrationally aggressive in unearthing any and every source of alleged and imagined revenue using their punitive powers. I see this in every one of India's 200 largest companies. Each is littered with tax disputes with the Govt.

Having said this we should give a fair hearing to both sides. There is a possibility of the OEM knowingly making use of this loophole. I would not assume that away. There is an equal possibility the Govt has been studying this for some time and chose to attack once it had its data/evidence in order. Unlike several members on this thread I would not assume Govt bad boy OEM good boy yet. Let the facts come out.

To give readers a perspective of size the Indian income tax payer is in dispute with the Govt of India on income tax to the tune of ~US$ 383 billion {Rs 31.4 trillion} from previous years compared to the annual collection of ~US$ 515 billion {Rs 42.3 trillion}*. I could not find the number for disputed indirect taxes which is more relevant here but this gives a context.

*data for 2023-24

[Freespirit27]

Originally Posted by vamsi.vadrevu

If there's ambiguity about this and if VW can prove it, they might win. Ideally Indian government should have sent notices of breach of compliance long before they slapped the fine.

Indian government is indeed not acting in the spirit of "foreign investor friendly nation". If they found non compliance earlier, they should have notified before. Instead slapping a retroactive fine feels like a money grab initiative rather than actual penalty. Do they aim to teach a lesson to foreign companies? What's the point of such high penalty. To dissuade future non compliance from other foreign companies. To show who's the boss?

That is a little harsh considering the facts are otherwise!

I quote from IE - “In these cases, the investigations started in 2022 and it was generally noticed that the imports were split into multiple consignments, whereas these were falling in the category of a car in CKD condition and the rate applicable to CKD condition was leviable,” Sanjay Kumar Agarwal, chairman of the Central Board of Indirect Taxes and Customs (CBIC), told The Indian Express in an interview. “Some automobile companies were paying the rates applicable to CKD condition, (but) some car companies, for certain models imported in CKD condition. (This) means all the main parts were imported and assembled in India… So the rate on CKD was higher than the individual components. Accordingly, notices have been issued, but it is a culmination of investigations which were initiated in 2022,” Agarwal added, when asked about the tax demand notices being sent to companies such as Volkswagen and Kia. Unquote.

VW has prior international reputation of playing with other country's laws too in the emissions case. The laws of our land do take long time and that is something to flag, but to raise the flag of, 'lack of ease of doing business' every time a MG or a Vodafone or a VW is called to task is flawed. They are big companies and capable of finding bigger loopholes let their lawyers and CAs and management who suggested such routes earn their pay! It is not like VW is passing the profits down to customers or their cars are any cheaper! They are just maximising their margins and the government is extracting its pound of flesh - may the right team win.

[unplugged]

VW and Skoda management personnel many a times refer to this business model as parts and components model and not as CKD model in their media interviews. Even if the interviewer asks some question about CKD route, in their answers they refer to it as parts and components route. May be it's a well thought out media strategy

[volkman10]

Now BYD to face tax dispute in India.

- Foreign Automakers Kia, VW & BYD face tax disputes in India

- If foreign companies perceive India's tax laws as inconsistent or open to interpretation, they may reconsider entering or expanding within the Indian market.

- As South Africa welcomes the EV market with open arms, India is making headlines for its ongoing legal battles with foreign EV manufacturers.

- India's recent tax disputes are not solely targeting EV manufacturers but are part of a broader effort to enforce tax laws and promote local manufacturing.

- While India is eager to attract foreign investments, it aims to develop its domestic automotive industry. The balancing act often leads to regulatory measures that may seem unfavorable to foreign players but strengthen India's economy in the long run.

-Volkswagen has warned that India's tax notice "deals a body blow" to its image as an investment-friendly country. This could discourage other multinational corporations from expanding their operations in India.

Chinese EV manufacturer BYD has been accused of underpaying US$8.37m in taxes on components used in assembling and selling cars in India.

Although the company has since deposited the demanded amount, authorities continue to investigate the matter.

The ongoing probe could lead to additional tax charges and penalties.

If Volkswagen is forced to pay the tax demand, the financial burden could have long-term implications for its Indian operations. It could serve as a cautionary example for other foreign companies considering business expansion in India.

Link:

[volkman10]

How Volkswagen's software to order car parts & landed in $1.4 Billion tax trouble with India or is it arm twisting tactics for 'Make in India' / collaborate with Indian manufacturers?

https://www.youtube.com/watch?v=wY3s5MEJtwA