Kathmandu: Electric vehicle importers who allegedly evaded customs duties by falsely declaring high-capacity EVs as 99-kilowatt models have once again come under the government’s radar, with the Balen Shah-led administration preparing to reopen long-suppressed tax evasion files involving billions of rupees.
A year ago, the constitutional watchdog, the Office of the Auditor General, concluded that several Chinese EV brands imported into Nepal had under-declared motor power on customs documents, thereby evading Rs 3.77 billion in customs duties and taxes. Although the matter had reached the Department of Customs, the Revenue Investigation Department, and even the anti-graft commission, officials say the investigation was quietly buried under political protection during the previous KP Sharma Oli administration.
Now, customs officials say the new government has directed agencies to revive those files and pursue all pending tax recovery cases. “There is clear instruction from the top not to spare anyone involved in tax evasion under any pretext,” a senior Customs Department official said. “In the past, political interference prevented independent investigation. That barrier is no longer there.”
Under Nepal’s tax structure, electric vehicles with motor capacity below 100 kilowatts attract significantly lower customs duty and excise tax than those with motor capacity above that threshold. But Nepal has no effective technical mechanism to independently verify motor power during customs clearance. Exploiting this loophole, importers of Chinese EV brands, including BYD, Deepal, Omoda, Jaecoo, Seres and Leapmotor, allegedly imported vehicles with actual capacities well above 100 kilowatts while declaring them as 99-kilowatt models on paper.
The Auditor General documented this as direct customs revenue leakage in its 62nd Annual Report, stating that vehicles that should have been cleared under a higher-duty customs classification were instead processed under a lower tariff heading based on importer-declared 99-kilowatt peak motor power.
According to the report, EVs imported through Rasuwagadhi and Tatopani customs points were cleared under customs subheading 8703.80.59 applicable to lower-capacity EVs, whereas technical specifications published by official manufacturers indicate many of those vehicles fall within the 100 to 200 kilowatt range and should have been assessed under subheading 8703.80.69, attracting higher customs duty, excise duty and VAT. The Auditor General estimated unpaid revenue at Rs 2.74 billion from Rasuwagadhi and Rs 1.03 billion from Tatopani, totalling Rs 3.77 billion, and recommended immediate investigation and recovery.
What has alarmed investigators further is that the same EV models sold internationally at 150, 170, 190 or even 200 kilowatts were imported into Nepal with identical specifications, torque output and performance claims — except that their customs papers listed them as 99 kilowatts.
In electric vehicles, peak motor power serves the same functional significance that engine displacement does in petroleum cars. Lower motor power should naturally correspond to lower torque and reduced performance. But in many cases imported into Nepal, the declared 99-kilowatt versions produce the same torque, acceleration and features as the 150- or 190-kilowatt versions sold abroad, strongly suggesting that the capacity figures were manipulated only for tax purposes.
Investigators say even salespersons at auto exhibitions have informally admitted that there is “nothing to worry about because everything has been managed on paper” when questioned about why Nepal-bound models appear to have nearly half the motor power of the same cars sold internationally despite identical driving performance.
Officials involved in the inquiry say Chinese manufacturers appear to have issued whatever branding and specification documents Nepali dealers requested. “Chinese companies seem willing to prepare documentation in whatever format or specification local importers ask for,” one Auditor General official said.
Under Nepal’s prevailing fiscal law, EVs with motor power between 51 and 100 kilowatts pay about 63 per cent in total taxes, while those between 101 and 200 kilowatts are subject to roughly 85 per cent
One of the clearest examples cited by investigators is the Deepal S07 imported by MAW Vriddhi, linked to businessman Vishnu Agrawal. The vehicle has been sold in international markets with a 190-kilowatt motor, but was imported into Nepal as a 99-kilowatt EV. The Revenue Investigation Department had begun looking into the matter nearly two years ago.
The same discrepancy appears in the BYD Atto 3. Internationally, the model is sold with a 150-kilowatt motor, but in Nepal, it was imported as a 99-kilowatt vehicle. Officials note that when BYD attempted a similar under-declaration in Sri Lanka, customs authorities there imposed penalties worth billions. In Nepal, BYD’s authorized distributor is Cimex Inc., led by Yamuna Shrestha.
Likewise, the Omoda E5, sold internationally at 150 kilowatts, has entered Nepal under a 99-kilowatt declaration.
The tax incentive behind the alleged fraud is straightforward. Under Nepal’s prevailing fiscal law, EVs with motor power between 51 and 100 kilowatts pay about 63 per cent in total taxes, while those between 101 and 200 kilowatts are subject to roughly 85 per cent. By shaving motor capacity on paperwork to 99 kilowatts, importers were able to save massive amounts in customs duty and excise.
Despite this, customs officials routinely cleared vehicles solely based on invoices and importer declarations without any technical verification of actual motor capacity. The Auditor General noted that neither customs offices nor transport authorities had systems to scientifically verify EV motor ratings. Nepal’s Vehicle Testing Office in Teku can only measure wheel-generated peak output and lacks the technology to determine the actual installed motor capacity. Moreover, importers did not submit independent manufacturer-certified or third-party motor verification test reports.
Using catalogues published on manufacturer websites and export records from other countries, auditors found that numerous EV models imported into Nepal and declared as 99 kilowatts were in fact globally recognized as 100 to 200 kilowatt vehicles.
Following these findings, the Department of Customs had earlier instructed customs offices to initiate post-clearance audits. Around three dozen import declaration forms covering 33 EV models were selected for scrutiny by a committee led by Reform and Management Division Chief Amrit Lamsal under the Post Clearance Audit Procedure 2021. The committee reportedly concluded that tax evasion had occurred in all 33 selected models, although the full report has not yet been made public.
Under post-clearance audit rules, if irregularities are confirmed in one imported unit of a particular company, the investigation can be expanded to all vehicles imported by that company. Initially, customs office chiefs were reluctant to implement the audit order, fueling allegations that customs employees themselves were colluding with EV dealers. Only after persistent pressure from the anti-corruption commission did authorities move forward with the detailed examination.
Nepali EV traders who allegedly colluded with Chinese manufacturers to print whatever brand specifications they desired, and to write whatever kilowatt figure suited their tax calculations, may no longer escape accountability
Once the Auditor General formally described the matter as direct tax evasion, the Revenue Investigation Department also intensified its inquiry. A department source said officials had already been studying complaints and media reports about customs fraud, but the Auditor General’s findings forced a more aggressive investigation, including formal requests for records from the concerned importers.
Even then, officials say the inquiry was effectively stalled under pressure from the Oli government. With the change in political leadership, those dormant files are now being revived. Sources claim many of the same business houses that successfully used political influence to suppress the issue earlier are once again trying to cultivate proximity with those in power.
The anti-graft body has also sought explanations from the Revenue Investigation Department regarding progress on the case. Yet despite the Auditor General’s recommendation last year to recover Rs 3.77 billion, the government has still not collected the unpaid amount. Officials now estimate that with interest and penalties, the liability may approach Rs 5 billion in this year’s audit report.
Sources say the Balen Shah-led government, backed by senior figures of the National Independent Party, has made it a policy priority to bring long-protected economic crimes committed under the guise of legitimate business into the legal net. Cases that were previously muted because of political patronage are now being actively revisited.
That means Nepali EV traders who allegedly colluded with Chinese manufacturers to print whatever brand specifications they desired, and to write whatever kilowatt figure suited their tax calculations, may no longer escape accountability. Importers of brands such as BYD, Deepal, MG, Omoda, Seres, Great Wall Motors, Kaiyi, LS and Leapmotor are now facing renewed examination over what officials describe as systematic customs manipulation running into billions of rupees.
Officials say such deliberate exploitation of legal loopholes by profit-driven traders has done long-term damage not only to state revenue but also to the public image of the wider business community, reinforcing the perception that many in the private sector operate by influence rather than by law.
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