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Chinese automaker BYD under investigation for tax irregularities in India

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Indian authorities have launched a probe into the Chinese automaker BYD over claims of underpaid taxes on imported car parts it assembles and sells in the country.

The Directorate of Revenue Intelligence (DRI) alleges that BYD, China's largest electric vehicle maker, owes approximately 730 million rupees ($9 million) in taxes. 

Despite depositing to cover this amount following the DRI's initial findings, the investigation remains ongoing, and further tax charges and penalties may be imposed. 

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As of now, BYD has not received a final notice from the DRI and retains the right to contest the allegations.

BYD in India and China has declined to comment on the situation, and the finance ministry has not responded to inquiries seeking clarification. 

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This development comes as BYD faces increased scrutiny from the Indian government regarding its $1 billion proposal to produce cars locally. 

The tense diplomatic relations between India and China have resulted in tighter regulations on foreign investments from neighboring nations, further complicating BYD's expansion plans.

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Chinese companies have faced intensified scrutiny in India since 2020 when border clashes occurred between the two countries. 

Smartphone manufacturer Xiaomi has also faced accusations of illicit remittances to foreign entities under the guise of royalties, allegations it has denied and challenged in court.

India's tax structure for imported electric vehicles imposes 70 or 100 percent rates, depending on the vehicle's value. 

However, for imports of car parts assembled locally into EVs, lower rates of 15 or 35 percent apply if specific conditions are met. 

BYD is alleged not to have met these conditions, making it potentially liable for the higher tax rates.

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The exact period and number of cars affected by the alleged violation have not been disclosed. 

Despite these tax-related challenges, BYD remains committed to its Indian operations, having already invested more than $200 million in the country. 

The company currently markets the Atto 3 electric SUV and the e6 EV to corporate fleets, with plans to launch its Seal electric sedan later this year. 

Since commencing sales in 2022, BYD has registered approximately 1,960 car sales in India. 

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