Chinese Electric Vehicles Evade Rs 25.8 Million in Customs Duty

Kathmandu. Incidents of customs evasion and revenue embezzlement in vehicles entering Nepal have surfaced from time to time. In this context, the annual report of the Auditor General has revealed that Chinese brand Joylong electric vehicles have evaded millions of rupees in customs duties that should have been paid to the state. Specifically, serious abuse of tax concessions provided by the state for public transport has been found while importing Joylong electric vans and minibuses. The Auditor General has concluded that Joylong has evaded Rs 2.5844 crore in state revenue by fraudulently declaring minibuses as documents and cleverly manipulating them.

'Microbus' Under the Guise of 'Minibus'

The government has made significant customs and tax exemptions on the import of electric public transport vehicles (e.g., large buses and minibuses) with the objective of making public transport accessible and environmentally friendly. According to the Economic Act and Customs Law, large buses and minibuses that carry many passengers are subject to low customs duties. However, the legal provision is that when importing microbuses with low passenger capacity or vans for private use, customs duty, excise duty, and value-added tax (VAT) must be paid at a comparatively much higher rate.

The importers of Joylong vehicles have been found to be exploiting this legal loophole to deceive the state. They imported Joylong's E-4, E-5, and E-6 model vehicles, which are known as microbuses or vans in the international market. However, when filling out the customs declaration, they declared these vehicles not as microbuses but under the SS code for minibuses, which attract lower taxes. This resulted in paying millions of rupees less in customs duty for the same vehicle.

Cleverness of Folding Seats: Forgery in Standards

To classify any vehicle as a minibus, it must meet certain technical standards including seat capacity, weight, length, and wheelbase. According to the provisions of the Customs Department, only the permanent seats for the driver and regular passengers are considered when calculating passenger capacity. Foldable seats for conductors or temporary folding seats in the vehicle cannot be included in the calculation of passenger capacity.

However, the three models of vehicles imported by Joylong did not have enough permanent seats to meet the standards for a minibus. The importers cleverly installed folding seats in the interior of these vans. During customs clearance, these temporary and foldable seats were counted to show a higher passenger capacity. Although physically small microbuses, they were forcibly brought within the minibus standards by artificially increasing the passenger seat count on paper. The Auditor General's team's technical and documentary examination confirmed that these vehicles were not minibuses under any circumstances but were indeed microbuses subject to higher customs duties.

Negligence of Customs Officials

The Auditor General claims that such a large-scale customs evasion would not be possible solely through the efforts of the importer. Extreme negligence, irresponsibility, and potential collusion of customs officials are clearly evident. Legally, customs officials must thoroughly examine the physical condition of any vehicle, the catalog issued by the manufacturer, and the technical aspects of the vehicle before clearing it.

However, when clearing these Joylong vehicles, customs officials did not physically inspect the seats inside the vehicle. The Auditor General's report states that if they had checked the manufacturer's website or official brochure, the actual class and seating capacity of those vehicles would have been immediately apparent, but this was not done. However, the officials blindly accepted the details provided by the importer. These vehicles were allowed to operate on Nepal's roads after paying extremely low taxes instead of the high customs duties due to be collected by the state.

Loss of Rs 25.8 Million to the State

Due to Joylong's cleverness, millions of rupees in revenue that should have been deposited in the state treasury have been lost. The Auditor General's report indicates that the state has directly lost Rs 2.5844 crore in customs revenue from these three models of Joylong brand vehicles alone.

The failure of Joylong to pay the actual customs duty, excise duty, and value-added tax (VAT) not only creates problems for the state treasury but also puts other automobile businesses that pay taxes honestly at a disadvantage due to unfair competition.

What Happens Now?

The Office of the Auditor General has deemed Joylong's actions as serious financial irregularities and revenue evasion.

The Auditor General has issued clear directives to the Ministry of Finance and the Department of Customs, instructing them to reclassify those Joylong vehicles as microbuses according to the law and determine the taxes accordingly.

Now, the importing company will be required to compulsorily refund the evaded amount of Rs 2.5844 crore to the state. The Department of Customs will have the additional responsibility of recovering the amount, including the actual customs duty evaded, the penalty for violating the law, and the late fee for not paying taxes on time.

Currently, Joylong vehicles are sold by VG Motors, a subsidiary of Vishal Group.