In July 2023, Rajeev Chandrasekhar, the then Minister of State for Electronics and Information Technology, revealed that these three companies had collectively evaded taxes totalling Rs 9,000 crore, primarily by dodging customs duties and GST

The government is ramping up its scrutiny of Chinese smartphone makers Xiaomi, Vivo, and Oppo, with the Registrar of Companies (RoC) submitting a detailed investigation report that highlights suspected financial irregularities. The investigation, launched under the Ministry of Corporate Affairs (MCA), focuses on possible fund diversion, tax fraud, and customs duty evasion, raising concerns about the companies’ financial practices in India.

The RoC’s report, submitted to the MCA, suggests that further inquiries are needed into the potential diversion of funds and tax evasion by the three companies. Specifically, it draws attention to the possibility of illegal remittances, and both direct and indirect tax violations. The findings have been forwarded to India’s Goods and Services Tax (GST) department and the Central Board of Direct Taxes (CBDT), both of which will play a critical role in assessing the severity of the alleged financial discrepancies.

According to reports quoting government sources, “The report lays out potential areas of concern, including unpaid taxes and possible financial irregularities. The MCA is expected to authorize a deeper investigation within the next month. It may also look into any fund transfers to external entities for possible legal violations.” Officials confirmed that if the investigation reveals significant violations, the Serious Fraud Investigation Office (SFIO) could be brought in to handle the case, given its expertise in handling complex financial fraud cases.

India strengthens oversight on Chinese firms

The MCA’s ability to launch investigations stems from the Companies Act, which allows for action when there is reason to believe companies have violated legal provisions. This move is part of India’s broader push to enforce more stringent financial regulations on foreign companies operating within the country, particularly Chinese firms. The government has grown increasingly concerned about financial irregularities, including money laundering, tax evasion, and illicit financial activities involving Chinese-linked companies in the Indian smartphone industry.

In recent months, the scrutiny surrounding Xiaomi, Vivo, and Oppo has intensified. In July 2023, Rajeev Chandrasekhar, the then Minister of State for Electronics and Information Technology, revealed that these three companies had collectively evaded taxes totalling Rs 9,000 crore, primarily by dodging customs duties and GST. Oppo was reported to have evaded Rs 4,403 crore in customs duties between 2017 and 2021, while Xiaomi was accused of failing to pay Rs 653 crore in taxes during the 2019-2020 financial year.

The ongoing investigation is part of a broader trend of heightened Indian regulatory authorities' oversight of Chinese businesses in India. In 2022, Finance Minister Nirmala Sitharaman confirmed that these companies were under investigation for customs duty evasion and alleged illegal remittances of funds outside India. The government has been taking a firm stance on ensuring that foreign companies, particularly those with Chinese ties, comply with India’s regulatory standards, citing concerns over economic security and financial accountability.

As the MCA probe continues, Indian authorities are likely to deepen their efforts to scrutinize the financial operations of foreign companies, ensuring that they adhere to legal and tax regulations and safeguarding India’s economic interests.