comscore Xiaomi, Vivo and more: Why is govt investigating Chinese firms in India?

First Xiaomi, then Vivo, now Oppo: Why are Chinese firms on Indian govt's radar?

Ever since the stand off between the two countries, Indian government has increased its scrutiny over Chinese companies and their entities operating in India, which has resulted in these probes and investigations in India.

huawei, oppo, vivo, xiaomi

Chinese companies in India are in for trouble. Enforcement Directorate (ED), the Income Tax (IT) department and the Directorate of Revenue Intelligence (DRI) have been investigating Chinese tech companies in India for quite some time. Earlier this year, IT department conducted a probe into Huawei’s books. Shortly after, Xiaomi, turned up on ED’s radar. This was followed by Vivo. And now, Oppo is in their line of fire. Also Read - Independence Day sale: Best deals on Redmi Smart Band Pro, Amazfit Zepp E and more

This chain of events raises an imminent question — are these investigations unrelated or is there a bigger and perhaps even a more deeper reason behind it? Also Read - ED freezes nearly 65 crore worth bank assets of crypto exchange platform WazirX

Before we try and answer question let’s take a quick dive in to everything that as happened so far. Also Read - 5G smartphone shipments grew 163% in India, Samsung leads: Report

Oppo in trouble

DRI, in its investigation, has found out that Oppo evaded customs duty worth Rs 4,389 crore. In a PIB release, the Finance Ministry said that DRI conducted searches at the office premises of Oppo India and residences of its key management employees, which led the agency to ‘recover incriminating evidence indicating wilful mis-declaration in the description of certain items imported by Oppo India for use in the manufacture of mobile phones’. “This mis-declaration resulted in wrongful availment of ineligible duty exemption benefits by Oppo India amounting to Rs 2,981 crore,” the release said.

The ministry said that the investigation also revealed that Oppo India had paid royalty and licence fee to various multinational companies, some of which were based in China, in lieu of use of proprietary technology. However, the company did not add in the transaction value of the goods imported by it, which the ministry said is a violation of the Customs Valuation rules. “The alleged duty evasion by M/s Oppo India on this account is Rs. 1,408 crore,” the ministry wrote adding, “A sum of Rs 450 crore has been voluntarily deposited by Oppo India, as partial differential Customs duty short paid by them.”

ED vs Vivo

Earlier this month, ED said that it had raided a total of 48 location of Vivo and 23 entities associated with it across the country as a part of its investigation into the alleged money laundering case by the smartphone maker. During its probe, the agency seized Rs 73 lakh worth cash and 2kg gold bars. In addition to this, the department also said that it blocked 119 bank accounts pertaining to the company holding Rs 4.65 billion or $58.76 million over the allegations that the company had remitted almost 50 percent of its sales turnover in India, which stands at around Rs 62,476 crore, to China in a bid to avoid paying taxes here.

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

Soon after, Vivo moved the Delhi High Court against ED freezing the company’s accounts in the country. The Delhi HC, in response, asked ED to decide on the company’s representation in the matter. Additionally, the company urged the probing agency to unfreeze its bank accounts contending that the move would ‘jeopardise its existence’ in the country.

“The situation is further aggravated as there are immediate payments to be made towards statutory dues, salaries, rent, monies for daily business operations, including refund of monies to consumers who have cancelled online orders and servicing of finance facilities from various banks,” Vivo said, as reported by The Economic Times.

Then today, the Delhi High Court lifted the freeze on Vivo India’s bank accounts on the condition that it provides a bank guarantee of $119 million (Rs 945 crores approximately) for the same.

ED vs Xiaomi

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

“Such huge amounts in the name of Royalties were remitted on the instructions of their Chinese parent group entities. The amount remitted to other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities,” ED had said at the time. It had also summoned Xiaomi Global VP, Manu Kumar Jain in regard with the case.

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

The following month, Xiaomi, in a filing in Karnataka High Court alleged that the ED had threated Xiaomi India’s top executives — Jain, and current Chief Financial Officer Sammer BS Rao — and their families with dire consequences if they failed to provide the agency with desired statement.

In response to the report, ED denied the claims saying that Xiaomi’s accusations 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. The department raided the company’s premises in Delhi, Gurugram, and Bengaluru as a part of tax evasion investigation. The officials reportedly looked at the company’s financial documents, account books and records as part of the investigation.

At the time, Huawei had said that it was compliant with all the laws and that it would approach the related government department for more information and follow the right procedure.

But this is not the first instance

Notably, this is not the first time that Chinese tech brands have come under the government’s scanner. DRI, earlier this year, sent three show cause notices to Xiaomi India for evading customs duty worth Rs 653 crore between April 2017 and June 2020. At the time, the agency said that it had searches at Xiaomi India’s office premises, during which time it recovered evidence that indicated that the company was remitting royalty and licence fee to Qualcomm USA and Beijing Xiaomi Mobile Software Co under contractual obligation.

At the time, the company also conducted searches at the factories of Bharat 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 among others citing national security as the reason.

What is the Chinese government saying?

Chinese government, on its part, has remained cautiously optimistic stating that it hopes that the Indian government will provide a ‘fair and non-discriminatory’ environment to its companies.

“We hope the Indian authorities will abide by laws as they carry out the investigation and enforcement activities and provide a truly fair, just and non-discriminatory business environment for Chinese companies investing and operating in India,” Chinese Foreign Ministry spokesman Zhao Lijian had said.

But Why?

While these investigations might seem unrelated but they aren’t. In the heart of the matter lies the stand off between the Indian Army and Chinese forces near the Line of Actual Control or LAC in Eastern Ladakh and clashes between the forces of the two countries at Galwan.

Ever since the stand off between the two countries, Indian government has increased its scrutiny over Chinese companies and their entities operating in India, which has resulted in these probes and investigations in India.

For the latest tech news across the world, latest PC and Mobile games, tips & tricks, top-notch gadget reviews of most exciting releases follow BGR India’s Facebook, Twitter, subscribe our YouTube Channel. Also follow us on  Facebook Messenger for latest updates.
  • Published Date: July 13, 2022 7:22 PM IST

new arrivals in india