India Rejects Elon Musk's Demand to Extend Tax Breaks for Tesla Cars

Elon Musk is being wooed by states run by parties opposed to the federally governing BJP after the billionaire said how frustrating he finds the delay to Tesla's debut in India. Narendra Modi's government, which controls tax breaks, remains adamant about not offering incentives to set up an assembly line for the US electric car-maker.

In a significant setback to Tesla, India's top tax official has categorically stated that US electric car-makers will not receive any specific incentive to import their models to the Indian market.

Days after the Indian government presented its annual budget in the parliament, the tax official said that rules already allow partially built vehicles to be brought in and assembled locally at a lower duty.

"We looked at whether the taxes needed to be re-jigged, but some domestic production is happening, and some investments have come in with the present tariff structure … So, it is clear that this is not a hindrance," Vivek Johri, the top official at the Central Board of Indirect Taxes and Customs, said in a post-budget interview.

Tesla has yet to present a plan for local manufacturing and procurement from India, Johri added.

Last month Elon Musk tweeted that he is facing a lot of challenges to introducing Tesla to India.

He was invited by one of India's most senior politicians, Nitin Gadkari - minister of Road Transport and Highways - to roll out Tesla. But ever since, the world's richest man has been citing custom duty as high as 110 percent as a reason for not launching in India.

However, now that Musk has gone public with his disappointment over the ruling party's intransigence, five state governments, including those of Telangana and West Bengal, have invited him to launch his operations in their districts, offering better infrastructure and a streamlined approval process.

Indian states have set ambitious targets to attract investment and increase the availability of electric cars at a reasonable cost. However, Tesla's cheapest car, the Model-3, costs $44,690 (more than INR3.3 crore) in the US, which would attract more than 100 percent tax if it were imported to India.