Did Chinese Mobile Companies Evade Rs 8,000 Crore in Custom Duties in India?
The Indian smartphone market has witnessed exponential growth in recent years, attracting major players from around the world. Chinese smartphone manufacturers have emerged as dominant players, capturing significant market share. However, a recent revelation by the Finance Ministry has brought to light a concerning issue - several major Chinese mobile companies, including Xiaomi, Vivo, and Oppo, have been involved in evading customs duties and engaging in illegal remittances in India, amounting to a staggering Rs 8,000 crore. Despite the severity of these allegations, the tax authorities have only managed to recover a meager 8 percent of the total amount evaded.
Chinese Mobile Companies Evade Custom Duties in India
The Finance Ministry informed the parliament that major Chinese smartphone manufacturers, including Xiaomi, Vivo, and Oppo, have evaded customs duties and engaged in illegal remittances in India, amounting to a staggering Rs 8,000 crore. However, the tax authorities have only managed to recover a mere 8 per cent of the total amount evaded by these companies.
According to the data presented in a written reply to the Rajya Sabha, Xiaomi Technology Pvt Ltd alone evaded taxes totalling Rs 653 crore in 2019-20, Rs 23.99 crore in 2020-21, and Rs 4.61 crore in 2022-23.
Oppo Mobile Pvt Ltd, similarly, was found to have evaded custom duties amounting to a whopping Rs 4,403 crore between 2017 and 2021. Out of the total Rs 8,000 crore evasion, the tax authorities have only been able to recover a mere Rs 604.55 crore, which accounts for only 8 per cent of the total amount evaded.
In addition to customs duty evasion, the ministry has also identified 13 instances of Goods and Services Tax (GST) evasion by these companies from July 2017 to June 2023.
While the evaded GST amounted to approximately Rs 1108 crore, the authorities managed to recover nearly Rs 1025 crore, indicating a recovery rate of around 92 per cent.
The Chinese mobile handset brands, including Oppo, Vivo, Xiaomi, Transsion, Realme, and Oneplus, have a substantial presence in India, with their combined turnover estimated to be roughly Rs 1.5 lakh crore in the fiscal year 2021-22.
These companies have contributed significantly to employment generation, providing direct employment to over 75,000 individuals in their manufacturing operations and an additional 80,000 in sales and operational roles. Indian companies predominantly handle the distribution of mobile handsets, though some Chinese companies like Oppo and Vivo also have Chinese distributors in India.
The Finance Ministry stated that in the fiscal year 2019-20, Xiaomi had already paid a duty along with interest and penalty totalling Rs 31,77,721 and Rs 13,30,143, respectively. Show cause notices were issued to all Chinese smartphone manufacturing firms regarding the custom duty evasion.
The Evasion Of Custom Duty
The matter of tax evasion by these Chinese mobile companies first came to light last year when the Finance Ministry disclosed its investigation into alleged tax evasion cases involving Oppo, Vivo India, and Xiaomi.
In the Monsoon session of the parliament, it was revealed that the Department of Revenue Intelligence (DRI) had issued a notice to Oppo for misdeclaration of certain goods, leading to a short payment in customs duty.
The Importance Of The Indian Market For Chinese Companies
The Indian market holds immense importance for Chinese companies, particularly in the smartphone industry. Over the past decade, India has emerged as one of the world’s largest and fastest-growing smartphone markets.
This growth has captured the attention of major Chinese mobile manufacturers, prompting them to invest heavily in establishing a strong presence in the country. Several factors contribute to India’s significance for Chinese companies:
Size and Growth Potential
India boasts a massive population of over 1.3 billion people, with a rapidly expanding middle class and increasing disposable incomes. This vast consumer base presents a significant market opportunity for smartphone manufacturers; as many parts of the world reach smartphone saturation, India remains a crucial frontier for sustained growth.
High Demand for Affordable Smartphones
Chinese companies have gained prominence in India because they offer feature-rich smartphones at competitive prices. Budget-conscious consumers largely drive India’s smartphone market, and Chinese manufacturers have been quick to cater to this demand by introducing affordable yet technologically advanced devices.
Competitive Landscape
The Indian smartphone market is highly competitive, with several domestic and international players vying for market share. With their robust manufacturing capabilities and economies of scale, Chinese companies have offered attractive devices at various price points, making them popular choices for Indian consumers.
E-commerce Penetration
The rise of e-commerce platforms in India has facilitated greater accessibility to smartphones for consumers across the country, especially in rural areas. Chinese companies have leveraged this distribution channel to reach a wider audience effectively.
The Last Bit, the Indian market, represents a critical growth frontier for Chinese mobile companies. The country’s large population, increasing purchasing power, and demand for affordable yet advanced smartphones have made India a focal point of their global expansion strategies.
However, the disclosure of the staggering Rs 8,000 crore custom tax evasion by major Chinese mobile companies has raised serious concerns about tax compliance and revenue loss for the Indian government. Despite the recovery efforts, the authorities have only managed to claw back a mere 8 per cent of the evaded amount, highlighting the challenges in enforcing tax laws on multinational corporations.
