According to a report by Reuters Wednesday, leading Chinese automaker, BYD (SZ:002594), is currently facing an investigation by India's Directorate of Revenue Intelligence (DRI) due to accusations of underpaid taxes on imported parts used in their assembled cars sold within India.
The investigation was revealed by two undisclosed sources who have direct knowledge of the matter. As per one of these sources, the DRI alleges that BYD, China's biggest electric vehicle (EV) manufacturer, underpaid taxes amounting to 730 million rupees (approximately $9M). The situation comes at a time when BYD's expansion plans have been affected by the strained relations between New Delhi and Beijing.
BYD has already deposited the mentioned sum following the DRI’s preliminary findings. However, the investigation is still ongoing, leaving the possibility of further tax charges and penalties open. Both BYD and the Indian authorities have refrained from giving any official response at this point.
BYD is currently experiencing increased scrutiny from New Delhi due to its $1 billion proposal to establish a local car manufacturing facility. This heightened scrutiny is a result of the stricter regulations on foreign investments from neighboring countries, including China. In response, BYD informed its Indian joint venture partner that it has contemplated abandoning the investment plans.
In India, fully built electric cars face import taxes of either 70% or 100%, depending on the vehicle's value. However, when importing car parts to be locally assembled into an electric vehicle, lower tax rates of 15% or 35% apply. These reduced rates are only applicable if specific parts like battery packs or motors are imported separately and not mounted on a complete vehicle chassis.
According to one of the sources, BYD has not fulfilled these conditions, making the company subject to paying either the 70% or 100% tax, depending on the value of the car.
BYD has already invested more than $200M in India and has sold about 1,960 cars in the country since starting sales in 2022.