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 components for vehicles it assembles and sells within the nation, two sources with direct information of the matter mentioned.

India’s Directorate of Revenue Intelligence (DRI) has alleged that China’s largest electrical automobile (EV) maker, whose enlargement plans have been hit by fractious relations between New Delhi and Beijing, underpaid tax of 730 million rupees ($9 million), one of many sources mentioned.

Although BYD has deposited this sum after the DRI’s preliminary findings, the supply added, the investigation is ongoing and will result in extra tax prices and penalties. The DRI is but to problem a last discover to BYD, which may problem the findings.

BYD in India and China didn’t reply to a number of requests in search of remark.

India’s finance ministry didn’t reply to an e mail and WhatsApp message in search of remark.

BYD is going through heightened scrutiny from New Delhi over a $1 billion proposal to construct vehicles regionally, amid tighter guidelines on international funding from bordering nations, together with China. BYD told its Indian three way partnership accomplice it had thought of dropping the funding plans.

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

Smartphone maker Xiaomi Corp (1810.HK) has been accused of unlawful remittances to international entities within the identify of royalties, allegations it has denied and challenged in court docket.

India taxes imports of totally constructed electrical vehicles at 70% or 100% based mostly on the worth of the automobile, however levies 15% or 35% on imports of automotive components which might be then assembled regionally into an EV.

Those decrease charges, nevertheless, are solely relevant when components similar to a battery pack or motor are imported, with out being mounted on a automobile chassis.

One of the sources mentioned BYD had not met these situations, making it liable to pay both 70% or 100% relying on the worth of the automotive.

Neither the time interval over which the alleged violation occurred nor the variety of vehicles affected was instantly clear.

BYD, which has already invested greater than $200 million in India, markets the Atto 3 electrical SUV and the e6 EV to company fleets and plans to launch its Seal electrical sedan later this 12 months.

It has offered about 1,960 vehicles in India since beginning gross sales in 2022, authorities registration knowledge reveals.

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

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