Indian Government Accuses Kia of ₹1,356 Crore Tax Evasion!

• Indian authorities have flagged a tax evasion of 13.5 billion rupees, issuing a 432-page notice detailing the alleged misconduct.
• The company allegedly imported over 90% of parts for Carnival in CKD form, which attracts higher customs duties, reports Reuters.
• If found guilty, Kia could face up to $310 million in penalties and interest.

Kia has been accused by Indian authorities of evading taxes to the tune of $155 million by misclassifying component imports, according to Reuters.

An exclusive report by Reuters revealed that a 432-page Notice was served to Kia alleging that Kia’s Carnival model minivan was “being imported in parts or components in separate lots” through different shipping ports in an attempt to discharge reduced customs duty.

The development also comes two days after German automaker Volkswagen sued Indian authorities to quash an “impossibly enormous” tax demand of $1.4 billion.

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Kia's response on Tax evasion notice

Kia India said it remains committed to following regulatory requirements, stating that they have consistently cooperated with the authorities whenever required.

“Regarding the current matter, we have filed a detailed response, supported by evidence and documentation to substantiate our stand. However, as the issue is currently under consideration of the relevant authorities, we won’t be able to comment further or provide additional details on the matter as of now,” said Kia India.

Kia’s Indian unit was sent a confidential notice by tax officers in April last year flagging alleged tax evasion of 13.5 billion Rupees, as per the government notice reported by Reuters.

If Kia loses the case, it could face a maximum penalty of $310 million, including fines and interest-double the alleged evaded tax amount. In the 2022/23 fiscal year, Kia’s revenue in India reached a record high of $4.45 billion, marking a 53% year-over-year increase, with a net profit of $243 million.

Earlier, Volkswagen group was accused of evading a higher tax of 30 per cent to 35 per cent applicable on parts imported in “completely knocked down” or CKD form in a single shipment, instead shipping separate parts over days, making them eligible for a tax rate of just 10 per cent to 15 per cent.

The Volkswagen investigation spanned 14 car models from the Skoda Kodiaq to the Audi A3 and the Volkswagen Tiguan.

In contrast, Kia’s case concerns only the Carnival model, a seven-seater priced around $73,500, which is among its most expensive cars in India.

Kia's market presence in India

Kia plays a major role in India’s auto market, which is the third-largest in the world. Notably, Kia rolled into the Indian automobile market in 2019 with the launch of the Seltos and has since been on an upward trajectory, accumulating sales of $4.45 billion fiscal during the 2022/23 fiscal year and yielding a net profit of $243 million.

Moreover, Kia currently sells around 4 million vehicles annually in India, holding approximately a 6% market share.