Three Chinese solar firms accused of US$2.64 billion tax dodge in India

Three Chinese solar companies were found to have evaded taxes on approximately INR220 billion (US$2.64 billion) of profits earned from INR450 billion worth of solar product sales in India over the past decade.

According to the Hindu Business Line, Indian tax authorities argue that these companies established Indian subsidiaries that constituted a "permanent establishment" (PE), making them liable for Indian taxes. However, the companies failed to declare these PEs and consequently avoided paying taxes on their Indian operations.

The firms employed a complex structure involving trading entities in Hong Kong and Singapore to route sales and avoid taxes. Their Indian subsidiaries primarily acted as sales and marketing arms, with minimal revenue and often reported losses.

Following these findings, the Indian tax department is now proceeding with tax assessment procedures against these companies to recover the unpaid taxes.

In October 2024, the Indian tax department began investigating 40 Chinese solar companies for potential tax evasion. This investigation came on the heels of a crackdown on Chinese smartphone manufacturers in India, which resulted in hefty fines.

India is heavily reliant on Chinese solar imports, especially solar panels and cells. In response, India has implemented various trade restrictions, including tariffs and anti-dumping duties on Chinese solar products to protect domestic manufacturers.

Source: Commerce Department of India, November 2024