India has started investigating Chinese smartphone makers, including Xiaomi and OnePlus, for “suspected” forex violations following raids by the country’s income tax department.
The Enforcement Directorate (ED) has summoned top officials of Xiaomi and OnePlus (a sub-brand of Oppo) after tax officials claimed to have seized data allegedly “corroborating charges of tax evasion”’ during raids late last year, according to a report by the Economic Times.
The ED summoned Manu Kumar Jain, Xiaomi’s former head of India operations, and now global vice-president. Jain reportedly recorded his statement at the ED’s Bengaluru office and also furnished some documents.
Jain, who is now based out of Dubai, was summoned twice by the agency but he failed to appear.
Xiaomi, which is India’s top smartphone brand, is being probed for alleged foreign remittances of over Rs 1,000 crore ($133.33 million), including transfers by the company to and on behalf of its group companies based abroad in the form of royalty payments.
Earlier in January this year, Xiaomi was fined Rs 653 crores ($87 million) by the Ministry of Finance on charges of evading customs duty from April 2017 to June 2020 under the provisions of the Customs Act, 1962.
“Xiaomi is a law-abiding and responsible company. We give paramount importance to the laws of the land. We are fully compliant with all the regulations and are confident of the same. We are cooperating with authorities with their investigation,” the handset maker said in a statement released to the Indian media.
OnePlus India’s finance department official was also summoned to join the investigation by the ED. However, it is unclear if the official appeared.
India’s Income Tax Department and the Directorate of Revenue Intelligence (DRI) had searched the premises of Oppo, Xiaomi and OnePlus.
Both agencies are already evaluating “lapses and discrepancies” in Chinese handset companies’ statutory financial filings. The companies are accused of reporting operational losses despite clocking strong sales and cornering top spots in the Indian smartphone market, the Times of India reported in January.
The newspaper also reported at the time that the Competition Commission of India may also join the probe to investigate whether Oppo, Xiaomi and OnePlus abused their dominant position and restrictive trade practices.
The Indian government, via the IT ministry, had unofficially conveyed to Oppo and Vivo to stop operating through their Chinese partners for distribution, and leverage local companies instead. However, both companies have yet to open up the chain to local players.
The government is separately exploring potential regulation to mandate teardown testing of Chinese mobile handsets. Through this possible “mandatory teardown”, the Indian government will try to ensure that Chinese smartphone operating systems and applications are not snooping on Indian users.