China's EV giant BYD under scanner for alleged tax evasion in India on imported car parts

livemint.com:

Warren Buffet-backed chinese automaker BYD is currently under investigation in India due to allegations of underpaid taxes on imported parts used in the assembly and sale of its cars in the country, as reported by two sources familiar with the matter. As reported by news agency Reuters, India's Directorate of Revenue Intelligence (DRI) claims that BYD failed to pay 730 million rupees ($9 million) in taxes. Despite BYD depositing this amount following the DRI's preliminary findings, the investigation is still ongoing, and there may be further tax charges and penalties, it said.

However, the DRI has yet to issue a final notice to BYD, which would allow the company to challenge the findings. The Indian government has also been scrutinizing BYD's proposed $1 billion investment to manufacture cars locally, partly due to tighter regulations on foreign investment from neighboring nations, including China. The border clashes between India and China in 2020 have also increased the spotlight on Chinese companies operating in India.

BYD is also facing accusations of not meeting the conditions required for lower tax rates on imported car parts used in the assembly of electric vehicles. India taxes fully built electric cars at 70% or 100% based on the vehicle's value, but levies 15% or 35% on imported car parts assembled locally into EVs. However, these lower rates only apply when parts like battery packs or motors are imported without being mounted on a vehicle chassis.

According to one source, BYD did not meet these conditions, making it liable for the higher tax rates of 70% or 100%, depending on the car's value. The exact time period of the alleged violation and the number of affected cars have not been clarified yet. BYD has