The Bombay High Court will hear Skoda Auto Volkswagen India’s petition against a $1.4 billion tax demand from Indian customs on February 17. The authorities accuse the company of misclassifying imports to pay lower duties. The outcome could significantly impact Volkswagen’s operations in India, which have expanded through major investments and structural changes.
Mumbai: The Bombay High Court has scheduled a hearing for February 17 on a petition filed by Skoda Auto Volkswagen India challenging a massive $1.4 billion tax demand by Indian customs authorities.
The Volkswagen Group, which operates in India through Skoda Auto Volkswagen India, has been accused of deliberately misclassifying imports to reduce customs duty payments. Authorities claim that the company declared imported parts as individual components rather than as “completely knocked down” (CKD) units, which would have attracted higher import duties.
The Indian Customs Department issued a show-cause notice in September 2024 under the Customs Act, alleging that the company misclassified Audi, Skoda, and Volkswagen car imports, leading to lower duty payments.
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According to the notice, CKD units attract a 30-35% duty, but Volkswagen declared its imports as separate components in different shipments, paying only 5-15% in duties. The government now seeks $1.4 billion in unpaid taxes from the automaker.
Volkswagen’s Skoda, Audi, and VW models, including Octavia, Superb, Kodiaq, Passat, Jetta, and Tiguan, have been assembled in India after being imported as CKD units.
On Wednesday, Skoda Auto Volkswagen’s legal team sought an urgent hearing before a division bench of Justices B P Colabawalla and Firdosh Pooniwalla. The High Court agreed to hear the plea on February 17.
In 2019, Volkswagen Group India merged its three passenger car subsidiaries into Skoda Auto Volkswagen India to streamline operations and increase market share for Volkswagen and Skoda by 2025.
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As part of its India 2.0 strategy, Volkswagen announced €1 billion (around ₹8,500 crore) in investments in July 2018 to strengthen its presence in the Indian market.
With this high-stakes legal battle, the outcome of the February 17 hearing could have major implications for the German auto giant’s operations in India.
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