4 hours Ago By CNBCTV18
The Indian government has accused South Korean carmaker Kia of misclassifying imported components to evade $155 million in taxes. Kia has denied the allegations. This dispute is part of broader tensions between foreign automakers and Indian authorities over tariff regulations.
In April 2024, Indian tax authorities issued a notice to Kia’s Indian unit, stating the company incorrectly declared imported parts for assembling its Carnival minivan. The notice, according to a Reuters report, alleges Kia separated shipments to reduce customs duties. Kia India has responded with documentation to support its stance and is awaiting a review.
The company stated it adheres to regulations and has cooperated with authorities. A 432-page government notice claims Kia imported Carnival car parts separately through multiple ports to lower customs duties. The notice states that this method prevented detection by customs authorities.
A similar case was brought against Volkswagen, which allegedly shipped components separately to pay lower taxes. While Volkswagen’s case involves 14 car models, Kia’s dispute centres on the Carnival, a seven-seater priced at approximately $73,500. If found liable, Kia may be required to pay up to $310 million, including penalties and interest, under Indian tax laws.
The company has already deposited $32 million “under protest” as the case proceeds, according to a government source. Kia’s financial filings for fiscal year 2022-23 show that its domestic sales reached $4.45 billion, a 53% increase, with a net profit of $243 million.
Kia holds a 6% share in India’s auto market, where its Seltos and Sonet SUVs are among the top-selling models. Other foreign automakers have faced similar tax challenges in India. Tesla has publicly criticized the country’s high import duties on electric vehicles.
Last week, Volkswagen filed a lawsuit against India over a $1.4 billion tax demand, calling the amount “impossibly enormous.” Indian authorities searched Kia’s offices and a factory in Andhra Pradesh in 2022.
During the probe, statements were taken from executives, including Chief Procurement Officer Lee Sang Hwa and Chief Finance Officer Kiho Yoo. The tax notice claims Kia executives altered their statements and attempted to mislead authorities. It also states that Kia imported over 90% of Carnival’s parts in completely knocked-down (CKD) form, which incurs a higher tax rate of 30%-35%, instead of the 10%-15% applied to separate shipments.
Recently, India reduced import duties on high-end motorcycles to 30%, a move seen as an effort to ease trade tensions with the U.S. However, fully assembled imported cars continue to be subject to tariffs exceeding 100%.
Sanjay Kumar Agarwal, India’s head of indirect taxes, stated that automakers failing to pay CKD duties are violating the law. “If they are on the wrong side, then the department will have to issue a notice,” he told on Tuesday. (With input from Reuters).
