India’s Ministry of Electronics and Information Technology (MeitY) on July 21 shared detailed information on the alleged tax evasion by Chinese smartphone manufacturers including the amounts of evasion and the action taken against the companies so far.
The total amount of tax evasion detected across various Chinese companies is around Rs 9075 crores, with Oppo, Vivo, and Xiaomi contributing to over 97 percent of this amount.
The Ministry also shared other details such as the number of Chinese mobile phone manufacturers in the country, their annual turnover, the number of people employed by them, and the number of Indian companies appointed as contract manufacturers, local manufacturers and local distributors by these Chinese companies.
These details were shared by MeitY in response to questions posed by Rajya Sabha MP Narain Dass Gupta in the parliament.
Why does this matter: Chinese brands account for more than 50 percent of market share in India’s smartphone market and the Indian government has been probing every major manufacturer (Xiaomi, Vivo, Oppo) for tax evasion for a few years now. Apart from smartphone manufactureres, the Indian government has been clamping down on Chinese companies in numerous other ways from repeatedly banning Chinese apps to introducing rules to limit Chinese investment in India. But this isn’t setting well with the Chinese government, which last May urged India to provide a “non-discriminatory business environment to Chinese companies.” In June 2022, the India Cellular and Electronics Association flagged Indian authorities’ “ignorance” of patent fees and said that the accusations of illegal royalty payments would have a “chilling effect” on the Indian business environment.
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Tax evasion by Chinese companies
The following details are for alleged evasion of Customs Duty and Goods and Service Tax (GST) from 2017 to June 2023:
Oppo (Rs 5086 crores):
- Customs Duty: Rs 4403 crores in two separate instances between 2019 and 2021, out of which around Rs 477 cores has been recovered and a Show Cause Notice for the remaining amount has been issued.
- GST: Rs 683 crores, which has been fully recovered with an additional amount of Rs 55 crores.
Vivo (Rs 2923 crores):
- Customs Duty: Rs 2875 crores in two separate instances between 2020 and 2023, out of which Rs 117 cores has been recovered and a Show Cause Notice for the remaining amount has been issued.
- GST: Rs 48 crores, which has been fully recovered with an additional amount of Rs 3 crores. Another separate instance of GST evasion is yet to be quantified.
Xiaomi (Rs 852 crores):
- Customs Duty: Rs 683 crores in four separate instances between 2019 and 2022, out of which around Rs 11 crores has been recovered and a Show Cause Notice for the remaining amount has been issued.
- GST: Rs 169 crores out of which Rs 82 crores has been recovered. The investigation is underway.
- G. Mobile Devices: Rs 77.28 crores in GST evasion, out of which Rs 74.4 cores has been recovered.
- S. Mobile Devices: Rs 64.42 crores in GST evasion, which has been fully recovered.
- Lenovo: Rs 42.36 crores in GST evasion.
- Zhongfu Mobile: Rs 15.02 crores in GST evasion, out of which Rs 5.67 cores has been recovered.
- Inone Smart Technology: Rs 5.5 crores in GST evasion, which has been fully recovered.
- Ismarta: Rs 5.3 crores in Customs Duty invasion for which a pre-notice consultation letter has been issued to the importer in July 2023.
- Bubugao Communications: Rs 4.46 crores in GST evasion, out of which Rs 3.98 cores has been recovered.
In all the cases of GST evasion noted above, “investigation has been initiated and companies are being
persuaded to deposit the tax amount/interest/penalty as applicable,” MeitY noted.
Other details on Chinese companies shared by the IT Ministry
- Major Chinese mobile brands operating in India: Oppo, Vivo, Xiaomi, Realme, OnePlus, and Transsion (which operates Itel, Tecno and Infinix). These companies manufacture mobile handsets either by themselves or through contract manufacturers.
- Cumulative turnover: The cumulative turnover of the above companies in 2021-22 was estimated to be Rs 1.5 lakh crore in India.
- Employment generation: The total direct employment generated by the above companies in their manufacturing operations is more than 75,000 and they also have a sales and operational workforce of around 80,000 workers.
- Number of Indian companies engaged: “Primarily, these Chinese companies have set up their own manufacturing units; however, they work with contract manufacturers like Bharat FIH Limited and DBG Technology (India) Private Limited.[…] The distribution of mobile handsets is mainly handled by Indian companies, however, some of the Chinese companies like Oppo and Vivo have some Chinese distributors also,” the Ministry stated.
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