Tuesday 28 June 2022
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Tesla denied tax waiver in India

India turned down the by Elon Musk’s Tesla for tax breaks to import electric cars. The union government has said that rules already allow bringing in partially-built vehicles and assembling them locally at a lower levy. “We looked at whether the duties need to be re-jigged, but some domestic production is happening and some investments have come in with the current structure,” Central Board of Indirect Taxes and Chairman Vivek Johri said in an interview on 3 February. “So, it is clear that this is not a hindrance,” he said.

The government encouraged Tesla to produce locally while Musk wants India to lower taxes — as high as 100% on imported EVs — to enable the company to first sell vehicles built elsewhere at competitive prices. However, it levies import duties of between 15-30% on parts shipped for assembly in the nation.

Tesla has yet to present a plan for local manufacturing and procurement from India, even after the government asked for it, Johri said. The union budget earlier this week did not mention any tax breaks for cleaner-but-imported vehicles, even though the western state of Maharashtra — home to financial capital Mumbai — publicly backed the company’s demands.

Chief ministers of at least five states in the country have invited Tesla to set up shops in their provinces after Musk said last month the US electric-vehicle pioneer was still facing a lot of challenges with the union government.

India has asked Tesla to consider importing so-called knocked-down units or partially built vehicles, which attract a lower import levy, instead of fully-built units.

Tesla should follow the lead of domestic companies like Mahindra & Mahindra Ltd. and Tata Motors, which are investing in building local capacity for electric vehicles, Johri said. “There are others importing completely built units. That route is open,” he said.

Tesla is also up against the likes of Mercedes-Benz, which will roll out a locally assembled EQS — the electric version of its flagship S-Class sedan — in India by the fourth quarter of this year. Indian roads are still dominated by cheap, petrol- and -powered cars made by the local units of Hyundai Motor and Suzuki Motor, with electric vehicles accounting for less than 1% of total sales, underscoring a huge opportunity for EV-makers in the world’s second-most populous nation.

Tesla first disclosed definite intent of entering India as early as 2019, but Musk said local rules prohibit him from testing the waters first with imports, as high duties make Tesla cars “unaffordable.”

In October, Union Transport Minister Nitin Gadkari had said he had asked Tesla to avoid selling China-made cars in the country and urged the automaker to manufacture, sell and export vehicles from a local factory.

“Some investment has already come in with the current structure. So why can’t others also come in?” Johri said. “There are other foreign brands also which are being sold in the country with the current tariff structure.”

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