Telecommunication majors ZTE and Vivo are reportedly under the scanner in India for alleged financial irregularities, Bloomberg reported this week, indicating an expansion of ongoing investigation into the finances and accounts of Chinese companies in the country.
According to the report, the Ministry of Corporate Affairs has received information of alleged violations by the companies, including fraud.
India has intensified investigation into Chinese firms doing business in the country following the deadly Galwan Valley border clashes in 2020. Since the start of political tensions, the Indian government has also banned 321 apps over security concerns.
Here’s a look at prominent Chinese brands under the taxman’s lens in India:
ZTE
A multinational telecommunications equipment and systems company headquartered in Shenzhen, Guangdong, ZTE Corporation is one of China’s leading telecom equipment manufacturers.
The Income Tax department had raided Gurgaon-based corporate offices and residences of senior executives of the company in August 2021. As per media reports, the raids were conducted at the corporate office, residences of foreign director, company secretary, accounts person and the cash handler of the firm’s foreign subsidiary company in India.
A report in the Times of India had quoted a Finance Ministry statement as saying that the examination of import bills vis-à-vis sale bills showed there was gross profit of approximately 30% on trading of the equipment, though the company had been booking “huge losses”.
“It is thus evident that losses are being booked by the company through bogus expenses in respect of services provided by it.”
Huawei
On February 16, 2022, the Income Tax department conducted searches at multiple premises of the Chinese telecom company in Delhi, Gurugram and Bengaluru as part of a tax evasion investigation.
According to reports, tax officials looked at financial documents, account books and company records as part of its investigation against the company, its Indian businesses and overseas transactions.
The tax department officials also reportedly prepared a list of associates, clients and partners of the company which includes its foreign and country-based partners.
The raids were conducted days after the Information and Technology ministry blocked 54 more apps with Chinese links, including Tencent Xriver, Nice Video baidu, Viva Video Editor, and gaming app Garena Free Fire Illuminate, citing security and privacy concerns. The government had even kept Huawei out of trials for 5G services.
The company, in a statement, said its operations in India were “firmly compliant” with the law.
“Huawei is confident our operations in India are firmly compliant to all laws and regulations. We will fully cooperate as per the rules and regulations and follow the right procedure,” the company had said.
Xiaomi
Global news agency Reuters had reported on May 12 this year that Indian tax officials froze $478 million worth of deposits in local bank accounts of China’s Xiaomi Corp as part of an investigation into alleged tax evasion.
The report quoted sources as saying that the fund freeze, carried out in February, was a fallout of the December raids conducted at Xiaomi India offices for alleged income tax evasion.
The investigation reportedly concerns allegations that Xiaomi purchased smartphones from its contract manufactures at inflated costs in India, allowing it to record a smaller profit by selling them to customers and evading corporate income taxes.
The Chinese smartphone giant has separately challenged a block on $725 million of its funds by the Enforcement Directorate for alleged illegal foreign remittances.
The ED has said that Xiaomi illegally made foreign remittances to certain entities “in the guise of” royalties even though it did not avail any service from them. The company has denied the allegation.
One Plus
OnePlus was among the Chinese mobile companies raided by the Income Tax Department in December 2021 on charges of tax evasion.
The raids were carried out at premises of Xiaomi, Oppo and OnePlus in the National Capital Region, Mumbai, Bengaluru, Kolkata, Chennai and Hyderabad.
OnePlus has merged into Oppo but operates as a separate brand.
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