By Nikunj Ohri, Aditya Kalra and Aditi Shah
NEW DELHI (Reuters) - India accuses South Korea of evading $155 million in taxes by misclassified parts imports, but the automaker denies wrongdoing, the latest fight for a foreign automaker, New Delhi uses New Delhi beat the tariffs, one document and two sources.
Kia competes with Hyundai and Suzuki in the world's third largest automotive market, where its Kia Seltos and Sonet SUVs are the best-sellers.
Foreign companies in India face headaches from high taxes and long-term investigations.
Tesla, for example, publicly complained about high taxes on imported electric vehicles, and Volkswagen filed a lawsuit last week asking them to demand a record $1.4 billion in return tax, called the "impossible huge tax."
Tax personnel issued a confidential notice to Kia's Indian units in April 2024, saying that tax evasion was reported by Reuters for the first time.
The notice shows that the crime concentration is to announce the incorrect announcement of imported tickets for parts, assembled for the automaker’s luxury carnival minivan.
Kia India said in a statement to Reuters, “There was a detailed response and was supported by comprehensive evidence and documents to confirm its position, and authorities are still reviewing the matter.
It added that Kia India is committed to complying with all regulations and “working consistently with the authorities”.
Indian Finance Ministry and Customs officials did not respond to Reuters’ questions.
In its 432-page notice, the government said the tax authorities found that Kia's carnival "car models were imported in parts or components through different ports" and "intentionally fulfilled less customs duties."
Kia has developed the strategy to ensure that importers “can’t (can’t) be detected by customs” and added in the notice that it was issued by the customs commissioner in the southern city of Chennai.
Two sources said the Kia case was similar to the Volkswagen case, which was accused of evading 30% to 35% of taxes, applicable to parts imported in a single shipment “completely knocked down” or CKD form, while It is to ship individual parts within a few days, making them eligible for a tax rate of only 10% to 15%.
The tax notice said that during the investigation, Kia website showed that India's carnival model was in the form of "CKD" and retail sales were 9,887 units between 2020 and 2022.
Volkswagen surveys span 14 automotive models from Skoda Kodiaq to Audi A3 and Volkswagen Tiguan.
By comparison, Kia's case only involves the Carnival model, a seven-seater that costs about $73,500, is one of India's most expensive cars.
Kia may face $310 MLN spending
Indian tax rules may require Kia to pay up to $310 million in case of losing controversy, or about twice the amount of evasion due to fines and interest.
India's latest available company filings show that Kia's domestic annual sales in fiscal 2022/23 were US$4.45 billion, its highest annually, up 53% from the year and net profit of US$243 million.
Last week, India cut import tariffs on fully built high-end motorcycles by 30%, a move widely believed to appease U.S. President Donald Trump, who used to call India the "tariff king."
However, fully assembled imported cars still attract more than 100% tax.
Kia has put Rs 278 crore ($32 million) of “protests” together as it continues to fight the Indian tax notice, which is still in progress.
In 2022, authorities searched the Kia office and a factory in Andhra Pradesh and issued statements from Indian executives, some of which identified it as Chief Procurement Officer Lee San San San HWA and Chief Financial Officer Kiho Yoo.
The tax notice stated that during the investigation, Kia executives “changed their positions and worked hard to mislead”.
Kia is accused of importing more than 90% of carnival parts, forming cars in the form of CKD, which attracts higher taxes.
India's indirect tax head Sanjay Kumar Agarwal told Reuters that the law is clear and some automakers are violating it by not taking on applicable CKD duties.
"If they're on the wrong side, then the department will have to send notices," he said in an interview Tuesday.
(Ginor Sports by Nykijh Ohri, Adita Kalra contains Whimem written by Shah Report whimem;