Kia Motors is the latest global carmaker facing tax-related challenges in India. Customs authorities accuse Kia India of tax evasion worth millions of dollars.
Indian tax officials sent a confidential notice to the South Korean carmaker in April last year. The notice accuses Kia of evading taxes that could total up to $155 million (£125 million). Kia responded to the claim with a detailed rebuttal, backed by comprehensive evidence and documentation. The notice was issued by a customs commissioner in Chennai, but Kia provided no additional details about the case.
Kia has a factory in Andhra Pradesh and has sold over a million vehicles in India since 2019. According to Reuters, the 432-page notice highlights Kia’s method of importing Carnival car components. Authorities claim Kia split shipments to reduce customs duties instead of importing the parts as a single lot, which would have incurred higher fees.
The case adds to a growing list of tax disputes involving foreign firms in India. Last year, Skoda Auto Volkswagen India, a subsidiary of German auto giant Volkswagen, received a $1.4 billion tax notice. Volkswagen has challenged the demand in the Bombay High Court and is pursuing all available legal options.
Experts warn that ongoing tax disputes may impact foreign investment. India’s economy has slowed recently, and foreign direct investment (FDI) has halved over the past year. HSBC Securities attributes the decline to multiple factors, including unresolved tax issues.
Dinesh Kanabar, a tax expert and former Deputy CEO of KPMG India, highlights concerns about India’s dispute resolution process. Court proceedings often take years, and companies may be forced to make partial payments before final verdicts. Addressing these issues is crucial if India hopes to revive FDI inflows.
High-profile cases, such as Vodafone’s $2 billion tax battle and Cairn Energy’s $1.4 billion retrospective tax case, demonstrate the challenges foreign firms face. Vodafone won its case in court, and Cairn Energy secured a victory in an international tribunal, forcing the Indian government to settle the dispute.
Mr. Kanabar stresses the need for accountability in tax offices. The government’s track record in defending tax demands on appeal remains weak, raising concerns about prolonged disputes and their impact on business confidence.