India is investigating the local units of ZTE and Vivo Mobile Communications for potential financial irregularities, extending its investigation into additional China-based enterprises after fining Xiaomi, some documents have revealed.
The Ministry of Corporate Affairs will examine auditor reports, and has received information from unknown sources indicating possible violations such as fraud, revealed by the documents seen by Bloomberg.
The documents also stated that an investigation into Vivo was requested in April this year to determine if there were major abnormalities in ownership and financial reporting while officials were urged to examine ZTE’s records and provide conclusions “on an urgent basis”.
Corporate Affairs Ministry Begins Scrutiny
Since 2020, when India and China engaged in the bloodiest conflict in decades along the disputed Himalayan border, New Delhi increased its inspection of the Chinese companies.
As a result, more than 200 Chinese mobile applications have been banned by the government, including Alibaba Group Holding Ltd’s shopping services, ByteDance Ltd’s TikTok and Xiaomi’s phone apps.
Indian security officials have been monitoring more than a dozen Chinese loan apps aimed at low-income people. Officials say these loan apps send data to their Chinese partners, where it can be exploited.
Beauty Camera: Sweet Selfie HD, Beauty Camera –– Selfie Camera, Equalizer & Bass Booster, CamCard for SalesForce Ent, Isoland 2: Ashes of Time Lite, Viva Video Editor, Tencent Xriver, Onmyoji Chess, Onmyoji Arena, AppLock, Dual Space Lite are among the 54 Chinese apps banned by the Ministry of Electronics and Information Technology (MeiTY) in February 2022.
According to an investigation undertaken by security and probe agencies, some Chinese enterprises in India were also discovered to be involved in tax evasions.
According to a report from the Director-General of GST Intelligence in India, some Chinese companies were availing of fraudulent Input Tax Credit (ITC) from certain firms without actual goods or services receipts. It was also stated that these firms were changing and collecting GST from the customers and not depositing the same.
Additionally, it was discovered that some Chinese firms, in collaboration with Indian companies, were issuing fake invoices to various China-based companies with Chinese nationals as directors without actually providing services.
It is noteworthy that in 2021, the income-tax agency conducted raids against ZTE Corp, uncovering a tax debt of hundreds of crores throughout years, unaccounted money, and inability to deduct tax at source for numerous financial years.
Additionally, reports also noted that Chinese tech giant Huawei attempted to dodge taxes in India by falsifying its accounts for several years, said the I-T department in February this year.
It should also be noted that last December, the I-T department carried out a search operation on Chinese smartphone makers and sellers Xiaomi and Oppo. Both companies were found to have failed to comply with the regulatory mandate prescribed by the I-T Act 1961 for the disclosure of transactions with associated enterprises.
However, the Enforcement Directorate (ED) has also stated earlier that it has confiscated assets worth $725 million (Rs 5,500 crore) from Chinese tech giant Xiaomi for violating the country’s foreign exchange laws. In the case of this popular smartphone company, under the Foreign Exchange Management Act (FEMA), 1999, the ED seized the money from the bank accounts of Xiaomi Technology India Pvt. Ltd.
As reported recently, the Ministry of Corporate Affairs has begun scrutinising the books of accounts of more than 500 Chinese enterprises.
Apart from ZTE and Vivo, the inspection includes Xiaomi, Oppo, Huawei Technologies, and various Alibaba Group Indian subsidiaries such as Alibaba.com India E-commerce Pvt. Ltd. and Alibaba Cloud (India) LLP.
The ministry reportedly has issued letters to companies seeking information on directors, shareholders, ultimate beneficiaries and owners in some cases, and is in the process of obtaining comparable information from the remainder of the companies.
However, a report is anticipated in July this year, according to Bloomberg. It was also said after the inspection reports are completed, the ministry will decide whether or not a major fraud probe by the Serious Fraud Office is required.
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