India accuses Kia of evading taxes of $155 mln in VW-like dispute: Report

India has accused Kia of evading taxes to the tune of $155 million by misclassifying component imports, Reuters reported. 

The carmaker has denied any wrongdoing. This marks the latest tiff by an automaker with the Delhi government over tariffs, as per a document and two persons in the know, Reuters reported. 

Tax officials sent a confidential note to Kia India in April 2024, raising alleged tax evasion of 13.5 billion rupees, as per a government notice Reuters is reporting for the first time. 

The notice stated that the offence was on wrongly declaring imports of components, for assembling of the company's Carnival minivan. 

Kia India noted that it made "a detailed response, supported by comprehensive evidence and documentation to substantiate" its stand, as per a statement to Reuters, and that the matter was still under review by the authorities. 

Kia India is committed to complying with all regulations and has "consistently cooperated with" authorities, it added.

Reuters could not elicit a response from the Finance Ministry and customs officials. 

As per the 432-page notice, the government noted that tax authorities found that Kia's Carnival "car model was being imported in parts or components in separate lots" via different ports, with the "intent to discharge lesser customs duty."

Kia devised the strategy to ensure the imports "could not (be) detected by customs," it added in the notice, issued by a customs commissioner in the southern city of Chennai.

Two persons in the know stated that this was similar to the Volkswagen case, which was accused of evading a higher tax of 40-35% applicable on parts imported in "completely knocked down" or CKD form in a single shipment, as opposed to shipping separate parts over days, making them eligible for a rate of merely 10-15%.

As per investigation, Kia's website showed the Carnival model sold in India as being in "CKD" form, with retail sales of 9,887 units between 2020 and 2022, the tax notice said.

Indian tax rules could require Kia to pay up to $310 million if it loses the dispute, or roughly double the amount evaded, due to penalty and interest, Reuters noted. 

Fully assembled imported cars draw a levy of over 100% at the moment. 

Kia has deposited 2.$32 million "under protest" as it continues to fight the Indian tax notice, which is still proceeding, said a government source on condition of anonymity. 

In 2022, authorities searched Kia offices and a factory in the southern state of Andhra Pradesh and took statements from India executives, some of whom the document identifies as Chief Procurement Officer Lee Sang Hwa, and Chief Finance Officer Kiho Yoo, Reuters reported. 

During the investigation, Kia executives "changed their stance and have made efforts to mislead," the tax notice stated, referring to statements on imports, manufacturing and taxation, Reuters noted. 

Kia was accused of importing more than 90% of the parts for Carnival, constituting a car in CKD form, which attracts higher tax, it added.

India's head of indirect taxes, Sanjay Kumar Agarwal, told Reuters the law was clear and some automakers were flouting it by not paying applicable CKD duties, the newswire stated.