Indian tax authorities have accused Kia Motors of evading taxes amounting to approximately $155 million (£125 million), according to a confidential notice sent last April. The notice, issued by a customs commissioner in Chennai, alleges that Kia imported components for its Carnival model in separate consignments rather than as a unified shipment, a practice that incurs significantly lower customs duties. This legal challenge adds Kia to a growing list of global corporations entangled in tax disputes with the Indian government.
Kia's manufacturing operations are based in the southern state of Andhra Pradesh, where the company has achieved significant success since launching in 2019, selling over a million vehicles in the Indian market. In response to the tax notice, Kia has filed a "detailed response supported by comprehensive evidence and documentation" to counter the accusations. This dispute underscores the increasingly complex regulatory landscape that international companies face in India.
The Indian government's clampdown on tax evasion has also entangled other multinational giants such as Volkswagen and Vodafone. The tax dispute with Volkswagen's unit, Skoda Auto Volkswagen India, involves a staggering $1.4 billion claim, while Vodafone's case concerning its acquisition of Hutchison's Indian arm in 2007 amounted to $2 billion. Last year, the government settled a high-profile dispute with Cairn Energy, an oil and gas major headquartered in Edinburgh.
Dinesh Kanabar, a prominent figure in the taxation field, emphasized the need for greater accountability within the tax office.
"We need a degree of accountability at the tax office, given that the track record of defending demands in appeal is quite poor," – Dinesh Kanabar
He further noted that ongoing court proceedings make it inappropriate to comment on the validity of these claims.
"The issue is being agitated before the courts and so it would not be appropriate to comment on the merits of the revenues' claim," – Dinesh Kanabar
The broader context of these disputes can be seen in the declining net foreign direct investment (FDI) into India, which has halved over the last year. This trend raises concerns about India's attractiveness as a destination for global businesses amid tightening regulatory scrutiny.