BIJAY DAMASE

KATHMANDU: The Revenue Investigation Department has initiated an investigation into Cymex Nepal, the distributor of BYD vehicles in Nepal, on suspicion of tax evasion by misclassifying high-capacity electric vehicles as low-capacity vehicles. According to the Financial Act, customs and excise duties are lower for low-capacity vehicles, while higher-capacity vehicles are subject to higher taxes. Misclassification results in significant revenue loss for the government.

Officials from the department have seized documents from Cymex Nepal to investigate the alleged tax evasion. Chakra Bahadur Budha, director general of the Revenue Investigation Department, told New Business Age that the department has asked the importer to provide additional details immediately. Based on confidential information regarding tax evasion, investigators have confiscated some documents and started a detailed inquiry.

"We received information that the state has been losing revenue for a long time due to the misclassification of vehicles, and based on that, the investigation proceeded," he said.

High-ranking officials involved in the investigation indicated that the probe might extend to other sellers and importers. "Initially, the investigation will focus on BYD. After that, we will investigate other vehicles," said an investigation officer. "We will soon determine who imported vehicles of what capacity and how much revenue was evaded."

A senior official of the Ministry of Finance said that the import of large number of vehicles some time ago itself is suspicious. A large number of electric vehicles were imported before the budget was announced on May 28.

According to the official of the ministry, the work of bringing vehicles into Nepal by reducing the kilowatts was going on until some time ago, in collusion between the producers and the importers.

Sameer Shrestha, Chief Marketing Officer of Cymex Nepal, claimed that the vehicles were imported after completing all necessary procedures and passing customs clearance. “We have submitted the documents requested by the Revenue Investigation Department. We are ready to assist in the investigation," he told New Business Age.

An official from the NADA Automobiles Association of Nepal expressed displeasure with the investigation into the import of BYD vehicles. "It is not appropriate for the government to scrutinize vehicles that have passed all technical checks costing millions of rupees," said the NADA official, who spoke on condition of anonymity.

Previously, the Ministry of Finance had instructed the Department of Customs to tighten inspections at all checkpoints following the large-scale entry of BYD vehicles. The department's letter urged meticulous verification of the details of electric vehicle before customs clearance and recommended visiting the manufacturer's website for information. All customs offices were instructed to carry out thorough technical checks and to refrain from clearing vehicles without adequate documentation.

Officials from the Department of Customs emphasized the need for technical verification to determine if the vehicle's engine capacity had been misrepresented. Dhundi Prasad Niraula, director general of the department, stated that customs officials are not equipped to detect such technical discrepancies. "That's a technical issue, and I don't know much about it," he said.

Despite the large number of import of electric vehicles before the budget, the state did not benefit significantly in terms of taxes. Government officials indicated that tax rates had to be adjusted due to the economic crisis. Nepal's tax system for vehicles is based on their capacity. With declining vehicle revenue, the government increased customs and excise duties on electric vehicles through the Finance Bill accompanying the next fiscal year's budget.

Under the new rates, EVs up to 50 kW now incur a 15 percent customs duty and a 5 percent excise duty, whereas previously there was no excise duty and only a 10 percent customs duty. For EVs from 51 to 100 kW, both customs and excise duties were raised by 5 percent each. Vehicles in this category were previously subject to a 15 percent customs duty and a 10 percent excise duty.

For EVs ranging from 101 to 200 kW, the new Finance Bill increased customs duty to 30 percent and maintained the excise duty at 20 percent. For EVs from 201 to 300 kW, customs duty increased by 20 percent while excise duty decreased by 10 percent. For EVs over 300 kW, the customs duty increased by 20 percent and excise duty was reduced by 10 percent, resulting in an overall 10 percent increase in taxes.

Prior to the budget announcement, a significant number of BYD and other electric vehicles were imported through the Rasuwagadhi customs checkpoint. As the importers tried to get the vehicles pass the customs clearance before the anticipated tax hike, there was a queue of vehicles at the customs.

Ram Prasad Pathak, head of Rasuwagadhi Customs Office, informed New Business Age that such vehicles are now arriving sporadically. "We were busy clearing BYD vehicles until the night of May 28," he said, adding, "Now the vehicles are arriving only sporadically."

According to Pathak, customs clearance for these vehicles is based on test-drive reports submitted by the importer. The Department of Customs reported that 8,497 electric four-wheelers were imported in the first 10 months of the current year, compared to 4,050 in the previous year.

The Department of Customs data shows that the government collected Rs 90 billion in revenue from vehicle imports and parts in fiscal year 2078/79, but only Rs 33.33 billion in the last fiscal year. In the first 9 months of the current year, the government collected Rs 39.89 billion from the import of electric vehicles.