India has accused South Korea’s Kia Motors of evading taxes worth $155 million (Rs 1,350 crore) by allegedly misclassifying component imports for its luxury Carnival minivan. The carmaker has denied any wrongdoing, calling the allegations “unfounded” and depositing Rs 278 crore ($32 million) “under protest” as the dispute continues.
According to a confidential notice issued by Indian tax authorities in April 2024, Kia allegedly imported parts for the Carnival model in separate lots through different ports to avoid higher customs duties. The government claims this was done to ensure the imports “could not be detected by customs,” allowing the company to pay a lower tax rate of 10-15% instead of the 30-35% applicable to completely knocked-down (CKD) units.
Kia India has refuted the allegations, stating it has provided “detailed responses supported by comprehensive evidence” to prove its compliance with Indian tax laws. The company emphasized its commitment to adhering to all regulations and cooperating with authorities.
This case mirrors similar disputes involving other foreign automakers in India. Volkswagen, for instance, is battling a $1.4 billion tax demand, while Tesla has repeatedly criticized India’s high import duties on electric vehicles. India’s complex tax structure and lengthy investigations have often been a point of contention for global companies operating in the country.
If Kia loses the dispute, it could face a payout of up to $310 million, including penalties and interest. The company’s annual sales in India reached $4.45 billion in fiscal 2022-23, marking a 53% year-on-year increase, with a net profit of $243 million.
The Carnival model, a seven-seater priced at around $73,500, is one of Kia’s most expensive vehicles in India. Tax authorities allege that over 90% of its parts were imported, classifying it as a CKD unit and attracting higher duties.
As the investigation continues, Kia remains steadfast in its defense, asserting that it has consistently followed Indian laws. The outcome of this case could set a precedent for how foreign automakers navigate India’s tax landscape.
Source: Web Team, C6N
