Finshots Daily A case that could reshape India’s auto industry
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Feb 7, 2025 A landmark court case is poised to reshape India's automotive industry. It explores the clash between the tax authorities and major car manufacturers, like Volkswagen and Kia Motors, over import tax disputes. The discussion sheds light on the complexities of car assembly in India. It highlights how these tax classifications could impact local manufacturing and economic viability. This legal battle could have lasting effects on automotive policies and the future of car production in the country.
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CKD vs. Individual Parts
- Automakers can declare imported components as individual parts or as a single CKD (Completely Knocked Down) kit.
- This distinction affects import duty, with CKD kits facing higher rates (around 35%) than individual parts (5-15%).
Government's Logic on Import Duties
- Higher duties on CKD kits discourage minimal local value addition (screwdriver assembly).
- Lower duties on individual parts incentivize local manufacturing and investment.
Volkswagen's Import Strategy
- Tax authorities allege Volkswagen imported nearly 97% of parts, declaring them individually to avoid higher CKD duties.
- They claim Volkswagen structured shipments over time to appear as individual imports, deceiving customs.