Volkswagen Sues India On $1.4 Billion Tax Demand

Volkswagen has filed a lawsuit against Indian authorities to overturn a $1.4 billion tax demand, arguing it contradicts India's import taxation rules for car parts. The company claims that the demand, which stems from misclassifying car components, threatens its investments in India and damages the foreign investment climate.

The Indian government accused Volkswagen of importing nearly complete cars in unassembled parts to reduce taxes. However, Volkswagen’s India unit asserts that its "part-by-part" import method was approved by the government in 2011, making the tax demand inconsistent with prior clarifications. The company argues this action undermines investor confidence in India’s business environment.

Volkswagen claims that the tax dispute, if unresolved, could result in penalties totaling up to $2.8 billion, severely impacting its operations in India. The case, scheduled for a court hearing on February 5, is seen as a critical moment for foreign investment in the country.