Are Chinese Smartphone Brands Evading Indian Tax Laws?

Are Chinese Smartphone Brands Evading Indian Tax Laws?

In the last few months, the Indian government agencies have raided the top three Chinese smartphone makers Xiaomi, Vivo and Oppo for violating the Indian tax laws. The agencies have recovered various evidences pertaining the tax evasion worth thousands of crores. The latest controversy has emerged in Oppo’s case. This action against Oppo has come amid growing scrutiny of Chinese smartphone makers in recent weeks.

Initially, Xiaomi was investigated by ED in relation to violating the Foreign Exchange Management Act. Later, Vivo India’s offices were raided by ED for remitting about 50% of its revenues to China. And now Oppo has come under the scanner of DRI. The matter is under investigation but there is strong prima facie evidence that these Chinese smartphone brands are misleading the Indian government to avail tax exemptions in an inappropriate way. 

Oppo in huge trouble

Directorate of Revenue Intelligence (DRI) has uncovered custom duty evasion of whopping INR 4,389 Cr by the Chinese smartphone brand Oppo India. DRI conducted a search operation at the premises of Oppo India along with residential properties of its top management employees. During the search, DRI collected the evidence of wilful misdeclaration of certain items while importing them to avail custom duty exemption benefits. 

Soon after the tax evasion unearthed by DRI, Oppo said in a statement that it would take appropriate steps against the DRI show cause notice. 

Vivo Moves to High Court 

The Enforcement Directorate has alleged that Vivo India is involved in the remittance of its 50% revenue or INR 62,476 crore to China. ED has seized the funds of Rs 465 crore, Rs 73 lakh in cash and 2 kg gold under anti-money laundering law. 

According to the ED’s statement, “ED has carried out searches at Vivo’s 48 locations across the country and its 23 associated companies. ED seized balance of Rs. 465 Crore from 119 bank accounts, including FDs of 66 Crore of Vivo India, 2kg gold bars, and Rs. 73 Lakh in cash” 

However, the latest update in the case is that Vivo has moved Delhi High Court, challenging ED’s action. The court has allowed Vivo India to operate the bank accounts upon a bank guarantee of Rs 950 crore. 

Xiaomi Under Scanner of ED 

A few months back, Xiaomi was investigated by the government authorities in the alleged illegal outward remittances. According to Enforcement Directorate (ED), Xiaomi was charged for violating Foreign Exchange Management Act (FEMA). In connection with this case, ED had taken control of the bank accounts of Xiaomi and had seized Rs. 5551.27 Crores. However, the company had told agencies that all its payments were legit.

The ongoing controversies belonging to the top 3 Chinese smartphone brands has created a chaos in the India market as well among their customers. The customer base of these brands is huge and they cater to millions of Indian customers. Such controversies make the customer loose trust and it would definitely harm the market reputation of the smartphone companies. But these recent alleged tax evading cases have reached to honourable court where their wrong doings will be verified.  

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