India and Volkswagen clash over $1.2 bn import tax claim

India defended a record $1.2 billion import duty demand against Volkswagen in a Mumbai court on Thursday, saying the German carmaker failed to supply required information on time. The tax demand relates to alleged undervaluation of imported car parts, with authorities claiming Volkswagen declared components separately and paid only a 5‑15 % tariff instead of the 30‑35 % rate applicable to almost complete, unassembled cars. India has been pursuing the case since 2024, accusing Volkswagen of under‑paying duties for years. Volkswagen, which holds about a 2 % share of India's auto market, rejected the allegations and argued the demand is years too late, noting that Indian law permits tax officials to review imports only for the past five years, not the twelve years cited by the company. Counsel Arvind Datar told the judges that the tax department cannot retroactively examine a twelve‑year period. Additional Solicitor General N. Venkataraman said Volkswagen did not provide the requested information within the deadline and added that no other Indian importer of auto parts has faced similar misconduct. The carmaker has called the case a “life and death” issue for its Indian business and described the demand as “impossibly enormous.” The dispute, the biggest import tax claim in India, was revived after the Mumbai High Court agreed to hear Volkswagen’s challenge anew following a prior delay. The case is expected to be heard again on Tuesday.

Context

Import‑tariff disputes have long worried foreign firms operating in India, with similar prolonged cases previously affecting companies like Samsung and LG. The outcome could influence how other automakers value and declare parts for import.