Scrapping Volkswagen’s $1.4 bn tax bill will be catastrophic: Govt
In a recent development, the Indian government has vehemently opposed the quashing of a $1.4 billion tax notice sent to Volkswagen, citing that it would have “catastrophic consequences” on the country’s tax regime. The government’s stance comes as a response to the car maker’s plea to set aside the tax notice, which was issued by the authorities for allegedly underpaying import taxes on components for its Audi, VW, and Skoda cars.
According to the government’s submission to the court, if the tax notice is quashed, it would create a dangerous precedent and encourage other companies to withhold information and then claim that the time limit for conducting a probe has ended. This, in turn, would compromise the government’s ability to collect taxes and would lead to a significant loss of revenue.
The government’s argument is based on the principle of the “principle of equity, justice, and good conscience” as enshrined in the Indian Constitution. The authorities have contended that the tax notice was issued after a thorough investigation that revealed a pattern of underpayment of import taxes by Volkswagen.
The dispute between the government and Volkswagen began when the authorities discovered that the car maker had been paying lesser import taxes on certain components used in its cars. The government alleged that Volkswagen had been misclassifying certain components as “auxiliary services” to avoid paying higher taxes on their importation.
The tax notice, which was issued in January 2020, seeks to recover the amount of $1.4 billion, which includes interest and penalty. Volkswagen has challenged the tax notice, arguing that the government’s claim is based on an “incorrect” understanding of the laws and that the notice was issued without providing any opportunity to the company to respond.
The government’s opposition to the quashing of the tax notice is a significant development in the case, as it highlights the importance of maintaining the government’s ability to collect taxes. The tax authorities have contended that the tax notice was issued after a thorough investigation and that the amount sought to be recovered is a legitimate demand.
The dispute between the government and Volkswagen has significant implications for the country’s tax regime. If the tax notice is quashed, it would set a bad precedent and encourage other companies to engage in similar practices. This would compromise the government’s ability to collect taxes and would lead to a significant loss of revenue.
In addition, the dispute highlights the importance of transparency and accountability in the country’s tax administration. The government’s ability to collect taxes is crucial for financing its development programs and providing essential public services. Any attempt to undermine the government’s ability to collect taxes would have serious consequences for the country’s economy and its citizens.
The case is currently pending before the court, and a decision is yet to be made. However, the government’s opposition to the quashing of the tax notice is a significant development that highlights the importance of maintaining the government’s ability to collect taxes.
