Volkswagen’s $1.4 billion tax bill in India

good morning. Today’s newsletter is about two legal cases that have a significant business impact. In Bengaluru, X is suing the government for what is called a “censorship” portal. And in Mumbai, Volkswagen is challenging a whopping $1.4 billion tax bill. There is also a very special “My Mantra” from the five-time World Chess Champion. Let’s dive in.

Taxation time

The retroactive tax bogeyman is back. Indian authorities are demanding Volkswagen be paid $1.4 billion in taxes. Last week, a legal representative for customs told Mumbai High Court that destroying the case in the case would have “devastating consequences” (the case is not understated in exaggeration; while seeking legal challenges to the tax bill, German automakers had said it was a “problem of life and death”).

Here’s the backstory: Customs is said to have its investigations that Volkswagen’s Indian unit imports a complete knockdown kit into the car, assembled in India, and mistakenly labelled as spare parts that are taxed at a lower fee. Officials say those practices date back to 2012 and ended up paying only $981 million in duties, rather than $2.355 billion.

Volkswagen reportedly claimed in a court application that “inaction and lateness” by tax authorities led to delays in shipping review. However, Customs said last week that the delay was caused by Volkswagen withholding information and data on its imports. If the case is thrown away for these reasons, the department added that other companies will encourage them to withhold information and adopt delayed tactics to ultimately pay lower duties.

The incident is reminiscent of Vodafone’s long battle with Indian authorities who became children of posters explaining India’s unfair retroactive tax demands. The case ran through several courts before the Hague international court ruled in 2020 in the company’s favor on the 2007 contract between Telecoms Group and Hutchison. In attempting to counteract the case in Mumbai courts, Volkswagen was hoping to avoid the similar fate of a long legal battle.

The Volkswagen incident comes at a critical time when the Indian government is actively trying to invest in multinational companies in domestic manufacturing. Long research by various government sectors is not the best condition for business. In India, the Dispute Tax Bill has reached nearly $186 billion over the past 20 years. It is important that governments do not lose revenue, but bureaucratic deficits, process delays and unreasonable penalties are harmful practices. In many cases, the process itself is a punishment.

It is clear that the government is aware of these issues. In November, customs inspections were mandated to be completed within a year, but no existing investigations such as Volkswagen under the umbrella were brought about. And in her February budget speech, Finance Minister Nirmala Sitharaman proposed changes aimed at reducing regulatory burdens, such as simplifying international transactions and expanding rules for safe ports.

Global headline grabs news, such as the current lawsuit with Volkswagen, can have a detrimental effect when companies evaluate the setup or expansion of their Indian business. The boundary between tax efficiency and tax “terrorism” is not that thin. It should be easy to stay on the right side of that.

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In censorship, X asks why

After appointing a free speech champion (even if he doesn’t always act that way), Elon Musk’s X is following the Indian government’s trends to block online content.

X is currently filing a lawsuit claiming that the government is implementing parallel mechanisms to avoid the legal provisions set out in the Information Technology Act. According to the original rules, only the Ministry of Electronics and Information Technology could approve requests to block content on the website. However, the government is now introducing new provisions that allow various officials and police officers to issue information blocking orders. These are done through a government-run portal called Sahyog (or “cooperation” in Hindi). X is a rare holdout that refuses to join this portal, with Meta, Telegram, Apple, Amazon and 34 already complying.

X calls Sahyog a “censorship portal” and argues that unlike the old regulations, new ones do not have many procedural safeguards to prevent misuse. The government’s position is that any order sent via the portal simply informs social media platforms of “illegal” content. However, if the content is not deleted, the platform shares the same responsibility as the person who posted the content.

So far, social media companies have been able to limit liability for the content of their sites by distinguishing between “platforms” and “publishers.” Under the new law, when content is flagged on the portal, the distinction becomes less relevant. X’s concerns can be understood, especially after the content moderation policy has been removed. Any number of posts can be tagged as attacks and the portal should constantly play the game of movement.

The Indian government loves freedom of speech, but as long as it’s free. It allows users and platforms to easily enter the crosshairs. X’s lawsuit against the government also comes when other mask companies are seeking entry into the Indian market. Of course, dealing with billionaires now means dealing with the US to some extent. This X’s ongoing suit suggests that it suggests Trump’s White House, where the mask plays a major role. On Thursday, you will get a better feeling after the next hearing of the incident.

Go to the diagram

A new study found that as climate change intensifies and water patterns undergo dramatic changes in urban areas, more than half of the world’s most populous cities are wet.

My Mantra

“About productivity – I can give you the importance you need to sleep really well and sleep well, that’s the most effective thing I know.”

Viswanathan Anand, 5-time World Chess Champion

Every week we invite successful Indians to teach them their mantras for work and life. Want to know what your boss is thinking? Reply to indiabrief@ft.com and nominate

Simple questions

India’s tech stocks have been hit hard. What is your strategy?

Please tell me why at indiabrief@ft.com

Buzzer round

On Friday we asked: Does the 800,000-year high in 2024 show the surprising impact of climate change?

The answer is. . . Carbon dioxide levels in the atmosphere (trembling!)

Aniruddha Dutta is once again a beat man. His answer came first, followed by Asuwath Kumar J and Agasthya Vivek.

Notes to say my LinkedIn game is terrible, I rarely log in. I’ll notice that I’m writing to me there, but sending me an email is a better option if you need a quick (er) reply.

Thank you for reading. Indian Business Briefing is compiled by Tee Zhuo. Send feedback, suggestions (and gossip) to indiabrief@ft.com.