Hero MotoCorp faces tax probe over links to vendor's $11 million false expenditure

Indian tax authorities are investigating motorcycle maker Hero MotoCorp’s relationship with a vendor suspected of reporting about 900 million rupees ($11 million) in false expenditure, two sources familiar with the matter told Reuters.

Based on the alleged fake spending by vendor Salt Experiences, Hero MotoCorp received a tax credit, leading to suspected tax evasion of about 160 million rupees, one of the two sources said, speaking on condition of anonymity.

A spokesperson for Hero MotoCorp said "there is no ongoing investigation against" the company on the matter, but did not elaborate further. Salt could not be reached for immediate comment.

The probe is being conducted by the Directorate General of Goods and Services Tax Intelligence (DGGI), the sources said.

India’s finance ministry, which oversees the DGGI, did not respond to an email seeking comment.

The investigation comes after India’s Directorate of Enforcement (ED), in a separate case, last week conducted searches at 12 premises owned by Hero MotoCorp and its founding shareholder Pawan Kant Munjal, seizing $3 million in assets.

The first source said Salt Experiences had paid 120 million rupees to the DGGI related to the alleged tax evasion, and the investigation was ongoing.

The probe by the DGGI is being monitored by other agencies, such as the ED and Ministry of Corporate Affairs (MCA), the sources said.

India’s MCA is also investigating Hero MotoCorp’s relationship with Salt Experiences in a case related to alleged diversion of funds, two government sources told Reuters in June, adding it was looking into whether the motorcycle maker controls Salt Experiences.

Hero MotoCorp said at the time that it had received no communication from the government and could not comment.