It's a perfect storm for Chinese mobile manufacturing companies operating in India.
The Indian government is looking into cases of alleged tax evasion by three major Chinese mobile companies -- Oppo, Vivo India and Xiaomi -- and notices have been issued to them, respectively. The cases slapped against these companies range from allegations in what the government termed as income tax evasion and customs violations to fraud and money laundering.
Union Finance Minister Nirmala Sitharaman on Tuesday informed the Upper House of the Parliament that the Department of Revenue Intelligence (DRI) issued notice to Oppo for a total customs duty of Rs. 4,389 crore on the grounds of misdeclaration of certain goods, leading to a short payment in duties. Duty evasion, Sitharaman said, is about Rs. 2,981 crores.
Separately, ED had reportedly conducted searches at more than 40 locations including Uttar Pradesh, Madhya Pradesh and some southern states in connection in connection with a money laundering case registered against Chinese smartphone manufacturer Vivo.
Earlier in July, the ED reportedly blocked nearly 119 bank accounts linked to Vivo's India that were holding several hundred crores as part of a probe into alleged money-laundering which the enforcement agency termed a "heinous economic offence". In response, the mobile company moved to Delhi High Court seeking permission to operate its bank account to which the Court allowed the company to operate the bank accounts subject to furnishing a bank guarantee of Rs. 950 crores.
The latest, the Directorate of Revenue Intelligence (DRI) again on Wednesday said it detected customs duty evasion of around Rs. 2,217 crore by Vivo Mobile India.
Coming to Xiaomi, three showcase notices have been issued and their approximate duty liability is about Rs 653 crore, of which it had deposited only Rs 46 lakh, Sitharaman on Tuesday said.
ED in late April reportedly seized Rs. 5,551.27 crore of Xiaomi Technology India Pvt Ltd-- a wholly-owned subsidiary of the China-based Xiaomi group-- under the Foreign Exchange Management Act (FEMA) in connection with illegal remittances made by the firm in February this year.
The seized amount of Rs. 5,551.27 crore, it had alleged, was lying in the bank accounts of Xiaomi Technology India Pvt Ltd, which started its operations in India in 2014 and started remitting the money in 2015.
After the ED's crackdown, Chinese telecom firm Xiaomi said it was committed to working closely with the government authorities to clarify what it termed as "misunderstandings".
"As a brand committed to India, all our operations are firmly compliant with local laws and regulations. We have studied the order from government authorities carefully," a Xiaomi spokesperson had then said, adding that it believed the company's royalty payments and statements to the bank were all "legit and truthful".
Also, ED had reportedly summoned Manu Kumar Jain, a former head of Xiaomi's India unit, in the case in mid-April this year.
It doesn't stop there.
Minister Sitharaman on Tuesday also said the ED was looking at 18 companies that were established by Vivo, where they have voluntarily remitted Rs. 62,000 crores as deposits.
Upon repeated charges against the Chinese companies related to serious economic offences, Beijing responded by saying it was closely following developments besides stressing on the matter that the Chinese government has always asked the companies to abide by laws and regulations when doing business overseas.
China also expressed hope the Indian authorities will abide by laws as they carry out the investigation and enforcement activities and provide a truly fair business environment.
"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," a Chinese Foreign Ministry spokesperson had said.
According to the Indian foreign ministry spokesperson, companies who operate here need to follow the law of the land and it believes that the authorities are taking steps as per law.