Indian authorities, however, allege that Volkswagen used internal software to place bulk orders for vehicles, which were then broken down into 700-1,500 components per vehicle to circumvent higher duties. Volkswagen denies any misuse of the software, asserting that it simply helps track consumer demand at a macro level and facilitates dealer orders.
The tax dispute has far-reaching implications for Volkswagen, as the potential penalties could see the total amount payable rise to an eye-watering $2.8 billion, a sum that dwarfs the company’s sales of $2.19 billion and net profit of $11 million in India for the 2023-24 fiscal year.
If Volkswagen loses the case, it could have a chilling effect on foreign businesses in India, especially given the current climate of high taxes and ongoing legal disputes. The company has stated that the tax notice “deals a body blow” to India’s efforts to position itself as an attractive destination for foreign investment.
With the court hearing scheduled to begin on 5 February, all eyes are on the outcome of this high-stakes legal battle.
