Kia contests $14 million India tax demand

Kia on Friday said it is contesting an Indian tax demand of $14 million for wrongly using free trade agreements to claim lower tariffs on some electronic car part imports, the latest tax tussle between the South Korean automaker and New Delhi.

Tax investigations in India can drag on for years and are often a sore point for foreign companies. Kia is separately fighting a $155 million tax evasion notice, and Volkswagen has sued New Delhi against a record $1.4 billion demand it calls “impossibly enormous.”

Kia commented on Friday for the first time on the Indian authorities’ 2023 confidential notice, which is not public but was reviewed by Reuters. It alleges that Kia imported some electronic parts but “wrongly” claimed benefits of lower duties which did not apply to those components under India’s free trade agreements with Korea and ASEAN nations.

The “issue regarding misclassification is an interpretational issue”, Kia said in a statement, adding that the company has submitted a detailed response to the tax authorities who are still reviewing the matter.

Such issues “are usually sorted out at the regulatory authorities’ level only and some may have to be taken to a higher level depending on the severity of interpretation,” Kia India said in an emailed response to Reuters.

Reuters also reported this week that India also accuses Kia separately of evading $155 million in taxes by paying lower duties in importing most of the components for its Carnival minivan, circumventing higher taxes payable when imports come in one shipment as a completely knocked down unit.

Kia has denied the allegations and is contesting the demand.

The 101-page, July 2023 tax notice alleges the company used incorrect tax declarations for imports such as engine and door control units between 2019 and 2022.

The notice puts the amount of alleged duty evaded at 1.22 billion rupees ($14 million) and adds that Kia India has already deposited 322 million rupees ($4 million) with the authorities “under protest” while the matter is heard.

Kia’s India annual sales stood at $4.45 billion in fiscal 2022/23, its highest ever, but net profit was $243 million for the same period.