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Old 9th May 2013, 09:40   #1
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Default CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

BMW's Chennai unit was searched by tax authorities on suspicion that the German automaker evaded taxes, the Economic Times has reported. BMW's India spokesman has confirmed that the inspections did take place.

The inspections took place on the behalf of apprehensions by the tax authorities that BMW paid duties for completely-knocked down (CKD) vehicles, when in reality, the company had imported the vehicles in semi-knocked down (SKD) state. The inspections at the factory are aimed at verifying if BMW did indeed import critical components such as the engine along with transmission and gearbox without payment of the mandated duty.

According to The Wall Street Journal, the authorities have seized a shipment of BMW engines and transmission equipment valued at Rs 250 crore. BMW could be hit with a tax claim ranging between Rs 500 to 650 crore as the duties on SKD kits is levied at 30 %, while taxes for CKD kits is levied at 10 %.

CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW-bmw3series03.jpg
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Old 9th May 2013, 10:16   #2
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Default CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

This notice comes close to the one that has already been served to two other manufacturers in the past:

Thread 1 (Honda Jazz discounts leave CBEC fuming, demand of 164 crore in taxes)

Thread 2 (Fiat India loses Rs 400 crore excise case in Supreme Court)

Last edited by Rehaan : 9th May 2013 at 11:10.
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Old 9th May 2013, 10:28   #3
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Default Re: CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

They had it coming.

When I was in Ladakh testing the Mercedes GL in 2011, the Mercedes Benz team were smarting from the fact that they actually assemble all engines via Force Motors and while BMW and VAG stated that they did or rather did not state that the engines were imported.

Next port of call for the tax man - VW Audi Skoda Aurangabad!
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Old 9th May 2013, 13:16   #4
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Default Re: CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

If this is true then BMW should be taken to task and slapped this heavy penalty. MNC's should bring in good practises into India and speed-up our system clean up rather than jump on the corruption badwagon.
Shameful that BMW took such an unethical route.
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Old 9th May 2013, 13:22   #5
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It's sad that they evaded taxes. Made more profits. It would have been nice for the customer if they would have sold the cars a little cheaper too
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Old 9th May 2013, 13:41   #6
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Default Re: CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

Wow this is news to me, How can they resort to such unethical ways to save the odd buck? Definitely not a a best practice to be followed.
And off course this cannot be done without the blessings of the company's Top Brass to show more profit? Or the proverbial case of assumption.
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Old 10th May 2013, 13:56   #7
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Default Re: CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

I am sure some smartass management guy at BMW did a risk analysis and decided that it would be cheaper to bribe their way out of it, in the event of getting caught.
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Old 10th May 2013, 16:57   #8
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Default Re: CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

Let us not reach this conclusion just as yet. CBEC and Indian tax authorities have been trigger happy. There is immense pressure from the ministry to share up the tax collections. This may be a fallout of the same. Most multinationals have very stingent regulatory norms/processes and the people at key positions are well paid. They would never like be on the wrong side of the law knowingly and jeopardise their careers.
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Old 10th May 2013, 17:03   #9
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Default Re: CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

We need to watch this carefully.

Mercedes could well be going beyond levels qualifying as CKD and BMW & VW group may just manage to qualify under CKD. If not though and if they did actually state SKD as CKD then they do deserve to be penalized.
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Old 11th May 2013, 20:44   #10
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Default Re: CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

Don't quote me on this.
But, AFAIK, BMW kept offering 3 and 5 customers SKDs that were imported from Germany (Or China?) while they claimed that they were CKDs to cheat the taxman.
Advantage: BMW(more competitive) +Customer(arguably better quality?) Disadvantage: Taxman (politicians' coffers)

From what I've heard from someone who's inside the assembly plant, its just the seats and tyres that are sourced from India and are fitted at the Chennai plant.
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Old 11th May 2013, 20:56   #11
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Lets be real - our tax authorities are loony and venal. Look at the cases they have filed against Shell, Nokia and Vodafone for example. Further, they keep coming up with new definitions of what something is - the best example of which is the new SUV definition by which a Duster is not an SUV but a SX4 is. As far as I know, insisting that engines have to be locally assembled for something to be CKD is not a standard way of defining that term. I am sure that this is one more case where laws are ambiguous, and will lead to a multi year battle in courts.

Last edited by Hayek : 11th May 2013 at 20:59.
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Old 11th May 2013, 22:53   #12
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1.I don't see this getting solved anytime soon. The final verdict is that from now on BMW will be on the right path (if they were wrong before).
2.Lot's of court cases, lots of money for lawyers.
3.People who bought their BMW already can feel good about themselves as they have superior quality.

On a different note : Why not spend some money into R&D for replacement of run flat tyres on Indian roads.
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Old 8th September 2013, 12:39   #13
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Default BMW faces import duty probe, possible fine: report

Quote:
Frankfurt: German carmaker BMW faces a fine of at least $100 million euros in India for alleged violations of import rules, WirtschaftsWoche reported.

India's customs office claims that BMW has for years declared imported car parts as part of larger assemblies rather than as separates, paying lower import duties than it should have as a result, the German weekly magazine said.

Customs authorities have imposed a fine of at least $100 million, which could grow further in a second stage, WirtschaftsWoche said, without specifying where it obtained the information.
http://profit.ndtv.com/news/corporat...-report-326846
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Old 8th September 2013, 15:43   #14
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Default Re: BMW faces import duty probe, possible fine: report

India INC's reputation is down thanks to it's corruption scams and foreign investors are skeptical about investments here, on the other hand the foreigners are indulging in promoting corruption!
Shame on you BMW, I am glad you are fined. Hopefully they don't pass this on to customers and make their shareholders suffer the loss instead.
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