First Xiaomi, then Vivo, now Oppo: Why are Chinese companies on the Indian government’s radar?


Chinese companies in India are in trouble. The Enforcement Directorate (ED), Income Tax (IT) Department and Directorate of Revenue Intelligence (DRI) have been probing Chinese tech companies in India for quite some time. Earlier this year, the IT department conducted an investigation into Huawei’s books. Shortly after, Xiaomi came under ED’s radar. It was followed by Vivo. And now, Oppo is in their line of fire.

This chain of events raises an imminent question – are these investigations unrelated or is there a bigger and perhaps even deeper reason behind it?

Before we try to answer the question, let’s take a quick dive on what has happened so far.

opposition in trouble

DRI in its investigation has found that OPPO evaded custom duty worth Rs 4,389 crore. In a PIB release, the finance ministry said that the DRI conducted searches at the office premises of Oppo India and the residences of its key management staff, which led the agency to “substandard evidence indicating willful mis-declaration in the description of certain items imported”. were recovered. Oppo India’ for use in manufacturing mobile phones. “This incorrect declaration resulted in incorrect availing of ineligible duty exemption benefit of Rs 2,981 crore by Oppo India,” the release said.

The ministry said the investigation also revealed that Oppo India had paid royalty and license fees to various multinational companies, some of which were based in China, in exchange for the use of proprietary technology. However, the company did not increase the transaction value of the goods imported by it, which the ministry termed as violation of customs assessment rules. “Alleged duty evasion by M/s Oppo India on this account of Rs. 1,408 crore,” the ministry added, adding, “an amount of Rs 450 crore has been voluntarily deposited by Oppo India as partly short payment of differential customs duty by them.” .

ED vs Vivo

Earlier this month, the ED said it had raided a total of 48 Vivo locations and 23 entities linked to it across the country as part of its probe into an alleged money laundering case by the smartphone maker. During investigation, the agency seized Rs 73 lakh in cash and 2 kg of gold bars. In addition, the department also said that it blocked 119 bank accounts belonging to the company to the tune of Rs 4.65 billion, or $58.76 million, on the allegation that the company remitted nearly 50 per cent of its sales business to India, which was approximately Rs. 62,476 is Rs. crores, to avoid paying taxes to China here.

Reports also said that two Chinese directors of Himachal Pradesh-based company Solan, who were linked to Vivo, had fled the country and these Chinese nationals were made directors in the company with forged documents.

Soon after, Vivo moved the Delhi High Court against the ED freezing the company’s accounts in the country. The Delhi High Court in response asked the ED to decide on the representation of the company in the matter. Additionally, the company urged the probe agency to unfreeze its bank accounts, saying the move would “threate its existence” in the country.

“The situation is further aggravated as statutory dues, salary, rent, money for daily business operations are to be paid immediately, including refund of money to consumers who have canceled online orders and availing finance facilities from various banks. Servicing,” Vivo as reported by The Economic Times.

Then today, the Delhi High Court vacated the bank accounts of Vivo India on the condition that it provides a bank guarantee of $119 million (about Rs 945 crore) for the same.

ED vs Xiaomi

Similarly, the ED, in April this year, seized Rs 5551.27 crore funds of Xiaomi Technology India Pvt Ltd, alleging that the company has violated foreign exchange regulations in the country. The ED said the company has remitted foreign currency worth Rs 5551.27 crore to three foreign-based entities, including a Xiaomi group entity, under the guise of royalty starting 2015.

“Such a huge amount in the name of royalty was remitted on the instructions of their Chinese parent group entities. The amount remitted to the other two US-based unrelated entities was also for the ultimate benefit of the Xiaomi group entities,” the ED said at the time. It had also summoned Xiaomi’s Global VP, Manu Kumar Jain, in connection with the matter.

Shortly after, the Karnataka High Court stayed the ED’s order freezing the company’s accounts. The court, as part of its order, said that the Chinese company can use its funds as long as it is doing so for day-to-day operations.

The following month, Xiaomi alleged in a filing in the Karnataka High Court that the ED had threatened Xiaomi India’s top executives – Jain, and current Chief Financial Officer Samar BS Rao – and their families if they failed to provide the agency with desired results. Failure to do so will result in dire consequences. Statement.

Responding to the report, the ED denied the claims, saying Xiaomi’s allegations were “untrue and baseless”.

Huawei vs IT Department

Similarly, earlier this year, the IT department conducted raids at several office premises of Huawei in India. As part of the tax evasion probe, the department raided the company’s premises in Delhi, Gurugram and Bengaluru. Officials reportedly perused the company’s financial documents, ledgers and records as part of the investigation.

At the time, Huawei said it complied with all laws and would contact the relevant government department for more information and due process.

But this is not the first case

Notably, this is not the first time that Chinese tech brands have come under government scrutiny. The DRI had earlier this year sent three show-cause notices to Xiaomi India to evade customs duty of Rs 653 crore between April 2017 and June 2020. At the time, the agency said it had searched Xiaomi India’s office premises, during which it found evidence indicating that the company would remit royalties and license fees to Qualcomm USA and Beijing Xiaomi Mobile Software Company under contractual obligations. Was being

At that time, the company also explored factories in India FIH, and Dixon Technologies, companies that are contract manufacturers for Xiaomi.

Additionally, the Indian government on various occasions banned over 267 China-based apps in the country, including TikTok, Shareit, UC Browser, Likee, WeChat, Weibo, PUBG Mobile, PUBG Mobile Lite and Alipay.

What is the Chinese government saying?

The Chinese government, on its part, remains cautiously optimistic and expects the Indian government to provide a ‘fair and non-discriminatory’ environment for its companies.

Chinese Foreign Ministry spokesman Zhao Lijian said, “We hope that the Indian authorities will comply with the laws as they carry out investigations and enforcement activities and ensure that Chinese companies investing and operating in India are truly fair, just and non-discriminatory.” -Provide a discriminatory business environment.” ,

but why?

While these investigations may seem unrelated they are not. At the heart of the matter is the standoff between the Indian Army and the Chinese Army along the Line of Actual Control or LAC in eastern Ladakh and the conflict between the armies of the two countries in Galwan.

Since the standoff between the two countries, the Indian government has increased its investigation on Chinese companies and their entities operating in India, resulting in these investigations and investigations in India.

Post First Xiaomi, then Vivo, now Oppo: Why are Chinese companies on the radar of the Indian government? Appeared first on BGR India.

Read full article here

Leave a Reply