According to two sources with firsthand knowledge of the situation, BYD, a Chinese manufacturer that assembles and sells vehicles in India, is the subject of an ongoing inquiry by India over claims that it underpaid taxes on imported parts for the vehicles it sold there.
The largest electric vehicle (EV) manufacturer in China, whose expansion plans have been hampered by tense relations between New Delhi and Beijing, is accused by India’s Directorate of Revenue Intelligence (DRI) of having underpaid tax by 730 million rupees ($9 million), according to one of the sources.
The source noted that even though BYD submitted this amount in response to the DRI’s initial findings, the investigation is still ongoing and may result in additional tax fines and penalties. BYD, which has the right to contest the conclusions, has not yet received a final notice from the DRI.
BYD in China and India did not respond to many requests for comment.
In response to requests for comment via email and WhatsApp, the Indian finance ministry did not respond.
New Delhi is paying more attention to BYD’s $1 billion plan to produce automobiles locally since there are stricter regulations governing foreign investment from neighbouring countries, notably China. BYD admitted to considering abandoning the investment plans to its Indian joint venture partner.
Since border conflicts between the neighbours broke out in 2020, Chinese companies have attracted attention in India.
Xiaomi Corp, a manufacturer of smartphones, has been charged with sending unauthorised payments to foreign organisations in the pretence of royalties. Xiaomi has refuted these charges in court.
India applies a tax of 70% or 100% on the value of imported fully manufactured EVs, but just 15% or 35% on imported auto parts that are then put together locally to create an EV.
However, such reduced rates are only valid for imported items that are not placed on a vehicle chassis, such as battery packs and motors.
According to one of the sources, BYD had not complied with these requirements, making it responsible for paying either 70% or 100% of the car’s worth.
It wasn’t immediately apparent how long the alleged infraction allegedly occurred or how many cars were involved.
BYD distributes the Atto 3 electric SUV and the e6 EV to corporate fleets and aims to introduce its Seal electric sedan later this year. BYD has already invested more than $200 million in India.
Since beginning sales in 2022, it has sold roughly 1,960 automobiles in India, according to data from government registrations.
