Chinese carmaker BYD faces Indian tax investigation over underpayment of levies on imported EV parts: sources

India’s Directorate of Revenue Intelligence alleges that BYD underpaid taxes of US$9 million, a source says
New Delhi recently rejected BYD’s bid to build a US$1 billion EV plant in the country

Electric & new energy vehicles

Reuters

Published: 5:00pm, 2 Aug 2023

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Chinese carmaker BYD faces an ongoing Indian investigation over allegations that it paid too little tax on imported parts for cars it assembles and sells in the country, two sources with direct knowledge of the matter said.

India’s Directorate of Revenue Intelligence (DRI) has alleged that China’s largest electric vehicle (EV) maker, whose expansion plans have been hit by fractious relations between New Delhi and Beijing, underpaid tax of 730 million rupees (US$9 million), one of the sources said.

Although BYD has deposited this sum after the DRI’s preliminary findings, the source added, the investigation is ongoing and could lead to additional tax charges and penalties. The DRI is yet to issue a final notice to BYD, which can challenge the findings.

BYD in India and China did not reply to several requests seeking comment. India’s finance ministry did not reply to an email and WhatsApp message seeking comment.

BYD’s Atto 3 electric car is displayed during its launch in New Delhi, India, on October 11, 2022. Photo: Reuters

News of the tax investigation comes after New Delhi rejected BYD’s bid to build a US$1 billion EV plant in the country, amid tighter rules on foreign investment from bordering nations, including China.

Companies from China have come under the spotlight in India since 2020 when border clashes broke out between the neighbours.

Smartphone maker Xiaomi has been accused of illegal remittances to foreign entities in the name of royalties, allegations it has denied and challenged in court.

India taxes imports of fully built electric cars at 70 per cent or 100 per cent based on the value of the vehicle, but levies 15 per cent or 35 per cent on imports of car parts that are then assembled locally into an EV.

Those lower rates, however, are only applicable when parts such as a battery pack or motor are imported without being mounted on a vehicle chassis.

One of the sources said BYD had not met these conditions, making it liable to pay one of the higher rates, depending on the value of the car.

Neither the time period over which the alleged violation took place nor the number of cars affected was immediately clear.

BYD, which has already invested more than US$200 million in India, markets the Atto 3 electric SUV and the e6 EV to corporate fleets and plans to launch its Seal electric sedan later this year.

It has sold about 1,960 cars in India since starting sales in 2022, government registration data shows.