Silke Mayr Indian customs authorities have accused Kia India of tax evasion involving millions of dollars.
Officials reportedly issued a confidential notice to Kia Motors, a South Korean carmaker, alleging unpaid taxes possibly amounting to $155m (£125m). Reuters revealed that authorities sent the notice in April last year.
Kia responded to the BBC, confirming it had submitted a detailed reply with supporting evidence to address the tax claim. The notice, sent by a customs commissioner in Chennai, provided no further information. Kia operates a manufacturing facility in Andhra Pradesh and has sold over a million vehicles in India since its 2019 entry into the market.
According to Reuters, the 432-page tax notice accused Kia of using a tactic to reduce customs duties. The company allegedly imported components for its Carnival model as separate shipments rather than a single batch, leading to significantly lower tariffs.
Kia isn’t the only automaker facing tax trouble. Last year, Indian authorities served Skoda Auto Volkswagen India with a $1.4bn tax demand. Volkswagen challenged the claim in the Bombay High Court and is pursuing legal remedies.
Experts caution that unresolved tax disputes could hinder foreign investment in India. HSBC Securities reports that net foreign direct investment (FDI) into India dropped by half over the past year. Factors such as economic slowdown and policy uncertainty have fueled investor concerns.
Tax expert Dinesh Kanabar highlighted the inefficiencies in India’s tax dispute resolution process. “Court cases in India can take years to resolve,” he said. Meanwhile, companies might face demands for partial payments.
Kanabar emphasized that improving the ease of business and reforming tax dispute mechanisms are vital for attracting FDI. India’s legal system has a history of prolonged corporate tax battles.
The Vodafone case, one of the most high-profile tax disputes, involved a $2bn demand related to a 2007 acquisition. The UK telecom giant ultimately won its case in court. Similarly, Cairn Energy, based in Edinburgh, fought a $1.4bn retrospective tax bill issued in 2014. An international tribunal ruled in Cairn’s favor, forcing India to settle last year.
Kanabar also criticized the tax office’s low success rate in defending cases on appeal. He called for greater accountability to prevent prolonged disputes and improve investor confidence.