Indian authorities are investigating if BMW’s local arm owes $120 million in taxes on auto parts imports, since March 2011.
Dow Jones Newswires published a report according to which tax authorities in India were investigating allegations that the German automaker imported parts that were partly assembled and declared that they were unassembled in order to avoid paying higher taxes. India has begun to aggressively increase taxes it collects as it struggles to deal with a huge federal budget gap, targeting especially foreign companies.
Authorities have seized a shipment of transmission equipment and engines for BMW worth 250 million rupees ($4.6 million). The automaker’s spokesman in Germany confirmed that India is currently investigating if the parts are “semi-knocked-down” (partly assembled) or “completely knocked-down” (unassembled).
Dow Jones denied the report that India has seized the shipment, and added that the automaker is fully cooperating with the authorities. India has a tax up to 100% for the partly assembled auto parts, while unassembled parts support only a 10% tax. This is part of the country’s strategy to encourage foreign automakers to manufacture locally.
“An inspection is in process by the authorities at the BMW plant in Chennai,” Abhay Dange, a BMW India spokesman, said in a text message. “We are cooperating with the authorities in the inspection process.”