NEW DELHI (Reuters) – Foreign companies have often struggled in India due to high tax demands related to duty evasion on imports or levies payable on big M&A transactions, leading to prolonged litigation at times.
Here are some of the key past and current tax disputes involving foreign companies:
KIA
South Korea’s Kia has been accused of dodging $155 million in taxes by misclassifying some car component imports, but the company is contesting the charge privately with officials, Reuters reported on Wednesday.
At the heart of the dispute lie Kia’s imports of parts of a car in separate shipments to assemble the vehicles in India, paying a lower tax applicable, circumventing the higher tax outgo when parts come together as a CKD, or a completely knocked down unit, of a car.
VOLKSWAGEN
In a similar case as Kia, Volkswagen has sued Indian authorities in a Mumbai court after being slapped with a $1.4 billion tax notice for importing parts related to its 14 models, including some Audi ones, instead of classifying them as CKD.
The German automaker’s court challenge states that India’s “impossibly enormous” tax demand will hit its investment in the country, and foreign investor sentiment.
VODAFONE
In one of the most controversial cases, Vodafone was slapped with a $2 billion tax demand when it purchased Indian assets of Hutchison Whampoa in an $11 billion deal in 2007.
The dispute saw years-long litigation including a ruling in company’s favour by India’s top court, followed by a change of law which reimposed the demand and an international arbitration between the two sides. Vodafone won the arbitration case in 2020.
CAIRN ENERGY
Britain’s Cairn Energy faced a more than $1.4 billion tax demand over the transfer of shares during an internal reorganization in 2007.
In 2011, Cairn Energy sold its majority stake in Cairn India to Vedanta Ltd, reducing its share in the Indian company to about 10%.
The Indian administration and Cairn India finally settled the years-long dispute in 2021 by offering to refund the tax amount.
PERNOD RICARD
French liquor giant Pernod Ricard has been accused by Indian authorities of undervaluing certain imports for more than a decade to avoid full payment of duties.
India is demanding roughly $250 million in back taxes but the maker of Chivas Regal and Absolut vodka has contested the findings. The dispute is pending.
In 2022, Pernod warned Prime Minister Narendra Modi’s administration that its long-running tax disputes with authorities on valuing liquor imports has inhibited fresh investment and its current business.
BYD
Chinese automaker BYD has been accused by Indian authorities of underpaying $8.37 million on parts for cars it assembles and sells in India.
BYD later deposited the demand but the probe is still ongoing and could lead to additional tax charges and penalties, Reuters has previously reported.
(Reporting by Arpan Chaturvedi; Editing by Aditya Kalra)
