On Wednesday, Reuters reported that Kia India was accused of misclassifying imported auto parts and evading taxes worth hundreds of billions of won.
Reuters revealed that tax officials sent Kia India a confidential notice in April last year outlining these allegations.
According to the notice, Kia India is suspected of misclassifying imported components used in the assembly of its luxury minivan, the Carnival.
Given that parts imported in a completely disassembled state are subject to a 30–35% tax rate, the tax authorities estimate that Kia evaded a total of $155 million. Officials believe that Kia had misclassified imported components to avoid paying higher tariffs.
If Kia India loses its court case, it could face penalties of up to $310 million, double the alleged unpaid taxes.
Kia India stated, “We have provided a detailed response to the tax authorities, supported by comprehensive evidence, and have been fully cooperative throughout this process.” The Indian Ministry of Finance and customs authorities have not yet commented.
Kia competes for market share in India, the world’s third-largest car market, alongside competitors Hyundai and Maruti Suzuki. Kia holds a 6% stake in the Indian market, where approximately 4 million passenger vehicles are sold annually.
Meanwhile, high taxes and lengthy tax evasion investigations make it difficult for foreign automakers to broaden their business in India. Volkswagen has sued for $1.4 billion in allegedly unpaid taxes, and Tesla has publicly criticized its displeasure with the high taxes on imported electric vehicles.
