Govt defends ₹11,000 cr customs duty demand against Volkswagen, accuses it of underpaying tariffs: What is the dispute
The government on Thursday defended its record ₹11,000 crore customs duty demand against German automaker Volkswagen before the Bombay High Court, arguing that the company failed to share the required information on time. The company, however, said the demand was raised years after the alleged imports.
The case against Volkswagen stems from the Centre’s allegation, made in 2024, that the German carmaker undervalued its imported vehicles in the country for years and paid lower-than-applicable tariffs, Reuters reported. The dispute has now become a flashpoint for Volkswagen as it holds talks with India’s JSW Group regarding the sale of a stake in its local operations.
Volkswagen, which holds a roughly two per cent market share in India, the world's third-largest car market, has repeatedly denied the allegations. The company had previously said that the case was a matter of “life and death” for its business in the country, adding that it was “impossibly enormous”.
According to reports, the dispute involves Skoda Auto Volkswagen India Pvt Ltd (SAVWIPL) and customs authorities over the classification and taxation of vehicle parts imported for the company’s Aurangabad plant.
Authorities alleged that Volkswagen brought in vehicle parts as individual components to avail lower customs duty, although the imports effectively formed completely knocked-down (CKD) kits for vehicle assembly. While CKD kits can attract duties of 30% to 60%, separately shipped components reportedly face rates of five per cent to 15%.
They further alleged that Volkswagen used software to split orders for vehicle parts among suppliers in different countries, helping the company avoid the higher duty applicable to CKD kits.
The allegations emerged during a Directorate of Revenue Intelligence (DRI) investigation, which officials said found that the Aurangabad plant was carrying out basic vehicle assembly using imported kits.
The dispute over India’s biggest-ever import tax demand resumed last week after the Bombay High Court said in August that it would hear Volkswagen’s challenge afresh, as the judges had failed to deliver a ruling in time.
On Thursday, the carmaker's counsel, Arvind Datar, said tax authorities could not review 12 years of the company’s imports, as the law permits such scrutiny only for the preceding five years.
Representing the government, Additional Solicitor General N Venkataraman argued that the carmaker did not provide the information sought in time, adding that no other automaker in the country importing parts had indulged in such misconduct.
The next hearing in the case has been scheduled for next week.
(with agency inputs)
Swati Gandhi is a digital journalist with over four years of experience, specialising in international and geopolitical issues. Her work focuses on foreign policy, global power shifts, and the political and economic forces shaping international relations, with a particular emphasis on how global developments affect India. She approaches journalism with a strong belief in context-driven reporting, aiming to break down complex global events into clear, accessible narratives for a wide readership.<br><br> Previously, Swati has worked at Business Standard, where she covered a range of beats including national affairs, politics, and business. This diverse newsroom experience helped her build a strong grounding in reporting, while also strengthening her ability to work across both breaking news and in-depth explanatory stories. Covering multiple beats early in her career has helped her be informed about her current work, allowing her to connect domestic developments with wider international trends.<br><br> At Live Mint, she focuses on international and geopolitical issues through a business and economic lens, examining how global political developments, foreign policy decisions, and power shifts impact markets, industries, and India’s strategic and economic interests.<br><br> She holds a Bachelor’s degree in English (Honours) from the University of Delhi and a Master’s degree in Journalism and Mass Communication from Guru Gobind Singh Indraprastha University. Her academic training has shaped her emphasis on precision, analytical rigour, and clarity in writing. Her interests include global political economy and the intersection of geopolitics with business.<br><br> Outside work, Swati focuses on exploring her passion and love for food. From fancy cafes to street spots, Swati explores food like a true foodie.
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