JSW Group has asked Volkswagen to absorb a $1.4bn Indian tax liability, a demand that could complicate a partnership central to the German carmaker’s revival in India, Bloomberg reported, citing unnamed sources.
The two companies agreed a preliminary joint venture structure and other commercial terms earlier this month, though final valuation remains open as financial due diligence continues.
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Both sides had aimed to sign a binding agreement by December 2026, but the sources said discussions will need to progress more quickly to meet that deadline.
How the tax liability is resolved remains one of several outstanding issues that could shape the eventual outcome, according to the report.
Under the proposed structure, JSW could take a majority stake in the closely held Skoda Auto Volkswagen India.
The venture would design, manufacture and sell passenger vehicles for domestic and export markets, spanning combustion, battery-electric, plug-in hybrid and hybrid variants, JSW and Volkswagen said in a joint statement issued earlier this month.
The tax dispute stems from allegations by Indian authorities that Volkswagen misclassified vehicle assembly kits shipped from Germany, the Czech Republic and Hungary between 2012 and 2024, understating the duties owed.
Volkswagen reportedly disputes the allegation and is contesting the demand in a Mumbai court, with a ruling unlikely before the year’s end.
Sources cited in the report said JSW executives believe any liability stemming from the ongoing litigation should rest with Volkswagen alone, and that JSW will walk away from the deal if forced to bear the cost – a position that could affect how the businesses are valued and how much each side invests.
The tax row follows another setback for Volkswagen this month, with Škoda chief executive Klaus Zellmer departing to head Geely-owned Volvo Car.
Zellmer had played a key role in the India negotiations and said in August that he expected the JSW partnership to close this year.
His departure, combined with the tax dispute, is said to have slowed talks.
Volkswagen has spent nearly two years seeking an Indian partner to share costs and risk, following the collapse of talks with Mahindra.
Its Skoda Auto unit holds only a modest share of the Indian market, despite years of local manufacturing investment and dedicated model development.
Just Auto has approached Volkswagen and JSW for comment.
The report comes as Volkswagen Group undergoes wider restructuring.
The group’s supervisory board approved Future Plan 2030 earlier this month, under which a further 50,000 positions will be cut across the group.
