The tax department has accused Volkswagen of playing the victim card in its ongoing $1.4 billion tax case before the Bombay High Court. The case, which entered its second day of arguments on Thursday, revolves around a significant tax demand of ₹12,000 crore levied against the automaker.
Volkswagen has strongly contested the tax notice, arguing that the department has acted with an unreasonable delay of 14 years. The company contended that the notice issued in 2024 is based on a 2011 notification, leaving them in an irretrievable situation where they cannot pass on the tax burden to customers. Volkswagen stated that had the clarity been provided in 2011, they would have had the option to either adjust their pricing strategy accordingly or reconsider their operations in India entirely.
Furthermore, Volkswagen argued that it had received a clarification from the revenue secretary at the time, which affirmed that the company was within its rights to claim a lower tax rate of 5%-15%. This, they claim, further supports their position against the substantial tax demand imposed by the department.
The tax department, however, dismissed Volkswagen’s stance, asserting that the company is attempting to portray itself as a victim when it is responsible for failing to pay the appropriate tax amount. The department maintained that the delay in enforcement does not absolve Volkswagen of its tax liabilities and that the company should have adhered to the 2011 notification requiring a higher tax outgo.
A key focus of the tax department’s argument is Volkswagen’s Aurangabad facility, which produces several high-premium models. The department pointed out that the local value addition at the facility is less than 3%, with the bulk of the vehicle components being imported. As a result, they argue that the tax bill accurately reflects the company’s tax obligations.
Additionally, the department emphasised that other automakers in the segment, including Maruti, Kia, Mercedes, and Volvo, have complied with the 2011 notification and are paying a higher tax rate of approximately 30%-35%.
These were the initial submissions presented by both sides, and the arguments are set to continue next week on Monday.
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