BYD faces investigation for underpaying tax in India: Report

Chinese automaker BYD is facing an ongoing Indian investigation on allegations that it paid too little tax on imported parts for cars it assembles and sells in the country, two persons in the know told Reuters.

One source informed the newswire that the country’s Directorate of Revenue Intelligence (DRI) has alleged that BYD underpaid tax of Rs 73 crore (US $ 9 million).

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 newswire reported.

The DRI is yet to issue a final notice to BYD, which can challenge the findings, Reuters further said.

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 clarification.

BYD is facing heightened scrutiny from New Delhi over a US$ 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.

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 told Reuters that BYD had not met these conditions, making it liable to pay either 70% or 100% depending on the value of the car.

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.