According to foreign media reports, India's income tax department is investigating about 40 Chinese photovoltaic companies , including Trina Solar, Longji Green Energy and their Indian distributors. The reason is suspected of tax evasion.
The investigation involves an in-depth examination of the business operations, transactions, invoices and strategies of Chinese photovoltaic enterprises to determine their permanent establishment (PE) location. The concept of permanent establishment is essential for determining the tax liability of foreign companies operating in India. Tax authorities assess the tax liability of foreign entities in India in accordance with tax treaties and local laws.
When a foreign enterprise carries on business in India through a permanent establishment, it may be subject to tax on the profits generated in India. However, if no income is deemed to be generated without a permanent establishment, there is no tax liability in India. The survey is particularly important
given that solar modules account for more than 60% of the total project cost. India is implementing the world's largest clean energy program, with imports of solar photovoltaic (PV) cells, panels and modules worth $3 billion in 2022. To reduce imports from China, India has imposed a 25% basic tariff on solar cells and a 40% tariff on modules since April last year. Despite these measures, India's imports of solar cells and modules from China rose 55% in the first quarter of this fiscal year, totaling $926.6 million, according to the
Ministry of Commerce. Prominent solar module manufacturers in China include Trina Solar, JinkoSolar, Longji Green Energy, Atlas Solar Power, Zhongsheng Solar, Chint Solar and GCL Energy Holdings Limited . "The problem revolves around the concept of permanent establishment, because these Chinese companies have staff and offices in India, but billing is not done in India," said
a person familiar with the matter.
The probe comes against a backdrop of tensions between India and China and Chinese companies facing intense scrutiny in India. The new Indian government has been imposing tariff and non-tariff barriers to restrict Chinese imports and has cancelled projects and contracts awarded to Chinese companies. In April 2020, India's Ministry of Industry and Internal Trade Promotion amended its foreign direct investment (FDI) policy to require government approval for all FDI from countries bordering India by land.