Indian customs authorities accuse Kia India of evading millions in taxes through improper import practices.

India’s tax authorities sent a confidential notice to Kia Motors in April 2022. The notice claims Kia evaded taxes potentially worth $155 million (£125 million), Reuters reported. Kia India responded to the tax claim with a detailed submission backed by evidence and documentation but shared no additional details.

Kia’s manufacturing hub operates in Andhra Pradesh, and since 2019, the company has sold over a million cars in India. The tax notice focuses on Kia’s Carnival model, alleging the company imported components as separate lots rather than a single shipment, which significantly reduced customs duties.

This case mirrors last year’s $1.4 billion tax notice sent to Skoda Auto Volkswagen India. Volkswagen is contesting the demand in the Bombay High Court and pursuing legal remedies.

Frequent tax disputes with global corporations raise concerns among foreign investors. India’s slow legal processes and tax dispute mechanisms discourage investment. HSBC Securities estimates that net foreign direct investment into India halved over the past year.

Dinesh Kanabar, a tax expert and former KPMG India executive, highlights the lengthy dispute resolution process. He warns of the risk of companies making partial payments before cases conclude.

India’s struggle to manage tax disputes isn’t new. Vodafone fought a $2 billion tax demand over its 2007 acquisition of Hutchison, eventually winning the case. Similarly, Cairn Energy battled a $1.4 billion retrospective tax bill before an international tribunal ruled in its favor. The government later settled.

Kanabar stresses the need for accountability in the tax office, citing the poor track record of defending claims in appeals. For India to revive foreign direct investment, he emphasizes the importance of streamlining tax dispute resolutions and creating a more predictable business environment.