Chinese carmaker BYD faces Indian tax investigation - sources - Reuters

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NEW DELHI, Aug 2 (Reuters) - Chinese automaker BYD (002594.SZ) 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 ($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 is facing heightened scrutiny from New Delhi over a $1 billion proposal to build cars locally, amid tighter rules on foreign investment from bordering nations, including China. BYD told its Indian joint venture partner it had considered dropping the investment plans.

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

Smartphone maker Xiaomi Corp (1810.HK) 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% or 100% based on the value of the vehicle, but levies 15% or 35% 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 either 70% or 100% 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 $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.

Reporting by Nikunj Ohri and Aditi Shah in New Delhi, additional reporting by Zoey Zhang in Shanghai; Editing by Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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