Chinese handset makers like Oppo, Vivo and Xiaomi, who are under scrutiny for alleged tax evasion, have been told by the government to broad-base their distributor network, which is currently fully owned by their own entities.
“The government’s stance is very clear — if they (Chinese handset makers) want to continue in India, they must effectively follow the law of the land and should have open transparent supply chains,” minister of state (MoS) for electronics and information technology Rajeev Chandrasekhar told FE.
“We realised that some of the Chinese brands were using unfair practices to crowd out the Indian handset manufacturers. They were using non-transparent, close supply chains. They were not paying taxes. I have met all the Chinese companies and told them clearly that if you want to continue in India, you must effectively follow the law of the land. You should have open transparent supply chains, pay taxes and follow the law of the land,” the minister said.
“We want to be a trusted player in the global value chain for electronics which means we need to be open and transparent in terms of how we are building the ecosystem. So, for India to be a transparent player in the electronic global value chain, our players also need to function transparently,” he added.
Government sources said the Chinese handset manufacturers operate in India in a manner where their distributor network is fully owned by their own entities. The distributors are also shareholders of the handset firms. As a result, these firms are able to undercut the Indian manufacturers as distributors work on zero margins and are able to earn as shareholders with growing market share.
Chinese mobile makers dominate the Indian market with a 60% market share. Xiaomi is the largest with a 21% market share, followed by Vivo and Realme at 14% each, and Oppo at 10%, according to CounterPoint Research.
Ever since Indo-China border tensions rising in mid-2020, the government has been taking a tough stance against Chinese investments. It banned more than 300 Chinese apps the same year and barred vendors from countries sharing land border with India from bidding for any public projects without its prior approval.
Chinese telecom handset firms and gear manufacturers have also been subjected to searches by the Enforcement Directorate (ED) and the income tax department for alleged violation of financial laws.
In July, ED registered a money laundering case against Vivo and froze 119 bank accounts related to the company and its associated entities. However, later, 14 entities were allowed by the Delhi High Court to operate their bank accounts. According to ED, the company had remitted `62,476 crore, almost 50% of its turnover out of India, mainly to China.
Before that, in April, ED had ordered for seizure of `5,551 crore worth of deposits of Xiaomi India for alleged contravention of the Foreign Exchange Management Act (Fema).
Earlier in February, the I-T department had raided Chinese telecom equipment manufacturing company Huawei and claimed to have found alleged manipulation of account books for reducing taxable income in India by the firm.