Skoda Auto Volkswagen India, the country arm of the global automotive giant, is facing trouble in India as the government has served a show-cause notice for alleged import duty evasion amounting to over USD 1.36 billion. This could result in a penalty equal to the dues, bringing the total liability to Rs 23,000 crore. The investigation, focused on models brought in as CKD units, found that the company declared them as individual components to pay lower import duty. Despite the company defending their actions, the authorities have dismissed their justification.
Volkswagen India's subsidiary, Skoda Auto Volkswagen India (SAVWIPL), finds itself facing legal scrutiny from the Indian government for alleged import duty evasion. The government has issued a show-cause notice to the company, accusing it of evading import duties amounting to over USD 1.36 billion (approximately Rs 23,000 crore).
The investigation alleges that the company declared components of knocked-down (CKD) units as individual components to pay lower import duties. However, SAVWIPL has defended its actions, claiming that the components were imported in accordance with the law.
This recent development adds to a series of challenges faced by SAVWIPL in India. In recent years, the company has struggled to gain market share in the country's competitive automobile sector.
Volkswagen Group entered the Indian market in 2001 with the launch of the Skoda Octavia. In 2010, the company acquired Volkswagen India as part of its global expansion strategy.
Since then, SAVWIPL has faced various issues, including:
A CKD (Completely Knocked Down) unit is disassembled before being imported into a country. The components are then assembled at a local manufacturing plant.
CKD units allow automakers to avoid import duties on fully assembled vehicles. This can save significant costs, especially for large vehicles and luxury cars.
The government alleges that SAVWIPL declared components of CKD units as individual components to pay lower import duties. This, they claim, violates Indian customs laws.
SAVWIPL has denied any wrongdoing and has stated that the components were imported in accordance with the law.
If found guilty, SAVWIPL could face a penalty equal to the amount of duty evaded, bringing the total liability to Rs 23,000 crore. The company could also lose its import privileges and face reputational damage.
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