CBEC likely to slap a Rs. 650 crore duty evasion notice to BMW

Redline6800 · 9th May 2013, 09:40

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

moralfibre · 9th May 2013, 10:16

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

Thread 1

Thread 2

ajmat · 9th May 2013, 10:28

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!

Sahil · 9th May 2013, 13:16

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.

Chirag911 · 9th May 2013, 13:22

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

ku69rd · 9th May 2013, 13:41

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.

ashwin489 · 10th May 2013, 13:56

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.

rajneeesh · 10th May 2013, 16:57

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.

ACM · 10th May 2013, 17:03

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.

nitrous · 11th May 2013, 20:44

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.

Hayek · 11th May 2013, 20:56

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.

Chirag911 · 11th May 2013, 22:53

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.

darklord · 8th September 2013, 12:39

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

Sahil · 8th September 2013, 15:43

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.

9th May 2013, 09:40	#1
Redline6800 BHPian Join Date: Aug 2008 Location: Bangalore Posts: 409 Thanked: 1,980 Times	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 %.
	(3) Thanks

9th May 2013, 10:16	#2
moralfibre Team-BHP Support Join Date: Dec 2004 Location: MH-12 Posts: 8,495 Thanked: 14,118 Times	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 Thread 2 Last edited by Rehaan : 9th May 2013 at 11:10.
	(1) Thanks

9th May 2013, 10:28	#3
ajmat Team-BHP Support Join Date: Feb 2004 Location: Bangalore Posts: 15,059 Thanked: 29,706 Times View My Garage	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!
	(5) Thanks

9th May 2013, 13:16	#4
Sahil Distinguished - BHPian Join Date: May 2004 Location: Bombay Posts: 6,322 Thanked: 7,766 Times	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.
	(4) Thanks

9th May 2013, 13:22	#5
Chirag911 BHPian Join Date: Apr 2013 Location: Gurgapn Posts: 33 Thanked: 4 Times	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
	(1) Thanks

9th May 2013, 13:41	#6
ku69rd Senior - BHPian Join Date: Sep 2009 Location: Bangalore Posts: 2,510 Thanked: 1,786 Times View My Garage	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.
	() Thanks

10th May 2013, 13:56	#7
ashwin489 BHPian Join Date: Dec 2008 Location: Border Town Posts: 274 Thanked: 446 Times	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.
	() Thanks

10th May 2013, 16:57	#8
rajneeesh Senior - BHPian Join Date: Apr 2007 Location: noida Posts: 1,118 Thanked: 557 Times	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.
	() Thanks

10th May 2013, 17:03	#9
ACM Distinguished - BHPian Join Date: Mar 2008 Location: Mumbai Posts: 4,751 Thanked: 4,379 Times View My Garage	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.
	() Thanks

11th May 2013, 20:44	#10
nitrous Senior - BHPian Join Date: May 2004 Location: UAE/Lon/Madras Posts: 6,965 Thanked: 329 Times View My Garage	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.
	() Thanks

11th May 2013, 20:56	#11
Hayek Distinguished - BHPian Join Date: Jul 2011 Location: Bombay Posts: 1,953 Thanked: 15,929 Times	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.
	(4) Thanks

11th May 2013, 22:53	#12
Chirag911 BHPian Join Date: Apr 2013 Location: Gurgapn Posts: 33 Thanked: 4 Times	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.
	() Thanks

8th September 2013, 15:43	#14
Sahil Distinguished - BHPian Join Date: May 2004 Location: Bombay Posts: 6,322 Thanked: 7,766 Times	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.
	(1) Thanks