The Government of India accused some of the leading Chinese smartphone manufacturers including Xiaomi, vivo and OPPO, evading tariffs and failing to pay billions of rupees to India in recent years. The Indian tax authorities have recovered only a small part of the total tax evasion of these companies, which amounts to about 80 billion rupees (about 870 million euros).
The Indian government accuses Xiaomi, Vivo and OPPO of tax evasion
According to CNBC reports, the Indian Finance Ministry notified the Indian Parliament on July 21 local time that these companies have exploited various regulatory loopholes to circumvent customs duties and the Goods and Services Tax (GST) applicable to imported products. The finance ministry also noted a total of 13 cases of GST evasion by these companies from July 2017 to June 2023.
Among the companies involved, Xiaomi she was the most affected by the accusation. The Indian government said in a written response to the Indian court that Xiaomi's total tax evasion in 2019-2020 was Rs 6,53 billion, total tax evasion in 2020-2021 was Rs 239,9 million, and total tax evasion in 2022-2023 was Rs 4,61 billion. In addition, Xiaomi has paid only a small part of the interest and fines due for tax evasion.
Also OPPO is alive they were accused of evading duties worth billions of rupees. The duty avoidance value of OPPO Mobile Pvt Ltd. amounted to Rs 4.403 crore between 2017 and 2021. Vivo India was raided by the Indian Anti-Money Laundering Executive Bureau on 5th July 2022 on suspicion of violating the “Money Laundering Prevention Act”. The agency froze 119 bank accounts of Vivo and its affiliates in India and assets worth around 4,65 billion rupees (about 50 million euros).
These companies are among the major Chinese mobile phone brands operating in India, along with Transsion (which operates three brands in India: Itel, Tecno and Infinix), Realme and OnePlus. In their response, the Indian Ministry of Finance stated that their cumulative turnover in India in 2021-2022 is estimated at Rs. The distribution of mobile phones is mostly handled by Indian companies, but some companies like OPPO and vivo also have some Chinese distributors.
The Chinese companies denied the allegations and said they followed Indian tax regulations. They have also tried to challenge the actions of the Indian tax authorities in the relevant judicial bodies.
For example, Xiaomi explained that royalties paid to foreign entities were used for the licensed technology and intellectual property used in the Indian version of the product. He also filed a request to lift the freeze of funds of Rs 55,513 billion (about US$680 million) in the bank account of his Indian subsidiary, but both were rejected.
Vivo argued that the freezing of its bank accounts was unjustified and obtained a partial lifting of the blockade after paying a guarantee to the Indian government. He also stated that he has a fixed fund of over 2,5 billion rupees in his account.
The tax evasion allegations against Chinese smartphone companies have emerged amid rising tensions between India and China, both politically and economically. India has imposed a series of restrictions and bans on Chinese applications and companies over the past two years, citing national security reasons. It has also promoted the local production of smartphones and other electronic products through various tax and financial incentives.
However, Chinese smartphone companies still have a strong presence in the Indian market, which is the second largest in the world after China. Chinese companies accounted for 75% of smartphone shipments in India in Q2023 28, with Xiaomi taking first place with a XNUMX% share, according to data from research firm Counterpoint. Chinese companies have also invested heavily in India, creating thousands of jobs and establishing research and development centers.
The outcome of the tax evasion allegations could have a significant impact on the operations and reputation of Chinese smartphone companies in India. It could also affect the relations between the two countries and the investment climate in India's technology sector.
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