Chinese companies implicated in financial violations in India: report

March 02, 2022 10:06 IS

New Delhi [India], March 2 (ANI): Since the Covid-19 pandemic, China has been trying to present itself as a reliable partner for economic recovery. But just like China’s vaccines, which have raised questions about effectiveness, the country’s partnership in economic recovery is fraught with waste, fraud and political manipulation.
Beijing has failed to crack down on corruption and crime, which are commonly used by Chinese government-affiliated companies in South Asia to gain an unfair advantage.
According to a report by the Directorate General of GST Intelligence in India, many Chinese companies have been caught in tax evasion. They used fraudulent input tax credits (ITC) from certain companies without actually receiving any goods or services. They also charged and collected GST from their customers and did not deposit them. Some Chinese companies, in collusion with Indian companies, issued fake invoices to various Chinese companies/companies that had Chinese nationals as directors without actually providing services.
There is a long list of Chinese companies involved in financial impropriety. In December 2021, the IT department conducted searches on Chinese smartphone makers and sellers Xiaomi and Oppo and found that both companies had failed to comply with the regulatory mandate to disclose related-company transactions required by the 1961 Income Tax Act. Such omissions make them liable for fines of up to Rs 1,000 crore.
In another case, Chinese companies engaged in chemical, ball bearing, machine parts and injection molding machine business were searched by the Indian Income Tax Agency (November 2021) for being involved in tax evasion by manipulating business books. Search operations of some 20 buildings across the country revealed that these companies had transferred nearly 20 crores to China over the past two years through a network of shell companies.

Some Chinese companies, including those that did good business in India, have deliberately indulged in tax evasion, as illustrated by the ByteDance case. Goods and Services Tax (GST) authorities have (2020) frozen ByteDance’s accounts for alleged tax evasion and failure to pay GST fees in full. Chinese nationals have been found using Indian SIM cards to open shell companies, bank accounts and run bogus cell phone numbers.
Aware of rising non-compliance and tax evasion, the Indian government ordered the Registrar of Companies (ROC) to set up Chinese cells across the country to investigate shell companies involving Chinese nationals. Apparently linked to online betting, lending, dating and gambling apps, these shell companies had amassed hundreds of crores.
There are cases of money laundering by Chinese companies from India. The Enforcement Directorate (ED) arrested (2020) a cryptocurrency trader in relation to a Chinese online betting scam. The business of websites hosted from outside India and run by Chinese nationals has been valued at over Rs 1,100 billion.
Chinese companies have also entered the Indian credit market and exploited Indian borrowers. During the lockdown caused by the pandemic, numerous Chinese-owned microcredit apps went live in India under very dodgy conditions. Chinese instant loan apps Momo, CashBus, Timely Cash, Y Cash, Kissht, Robo Cash, Fast Rupee, Cash Mama and Loan Time claimed to play fair and offered payday loans to Indians, targeting borrowers at the lower end of the income scale . Many of these apps have more than a million installs. Borrowers were charged exorbitant processing fees and interest rates that drove many lower-middle-class people into debt and forced them to commit suicide.
Shopee, a Chinese e-commerce company, flouted local regulations and set up operations under a complex corporate structure in Singapore and the Cayman Islands to mislead the Indian government about its origins. The Confederation of All India Traders (CAIT) complained about this to the Competition Authority and filed a lawsuit against Shopee for alleged unauthorized entry into the country.
Beijing is also estimated to be responsible for the largest illicit financial flows (IFFs) related to corrupt business practices worldwide by value. Against this background, the Indian government has started to design and implement protective measures. (ANI)

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