How did Vivo India cheat? Fraud by sending 50% turnover to China
The Enforcement Directorate (ED) found that the Indian arm of Chinese smartphone maker Vivo “remitted” almost 50 percent of its turnover, which is Rs.62,476 crore, mainly to China in order to avoid paying taxes here. Vivo was IPL Cricket’s main sponsor for three years till the previous season even after the Indo-China border dispute. Vivo is having 15% of the market share in India.
The ED also said it has seized funds worth Rs.465 crore kept in 119 bank accounts by various entities, Rs.73 lakh cash, and 2 kg gold bars after its pan-India raids that were launched early this week on July 5 against Vivo Mobile India Pvt. Ltd. And its 23 associated companies. On Wednesday, the agency conducted nationwide searches at more than 44 offices of Vivo and their associated companies.[1]
ED officials said an ex-director of Vivo, Bin Lou, left India in 2018 after incorporating a number of companies that are now under its scanner. It alleged that “employees of Vivo India, including some Chinese nationals, did not cooperate with the search proceedings and tried to abscond, remove and hide digital devices which were retrieved by the search teams.” ED Tweeted.
ED has carried out searches at 48 locations across the country belonging to VIVO Mobiles India Pvt. Ltd. and its 23 associated companies, and seized balance of Rs. 465 Crore lying in 119 bank accounts, including FDs of 66 Crore of Vivo India, 2kg gold bars, and Rs. 73 Lakh cash.
— ED (@dir_ed) July 7, 2022
Another Chinese mobile phone company Xiaomi was caught in April for illegally transferring more than Rs.5500 crore to China.[2]
Reference:
[1] ED raids Chinese smartphone maker and ex-IPL cricket sponsor Vivo & its linked firms – Jul 05, 2022, PGurus.com
[2] ED seizes Rs.5,551 crore of Chinese mobile phone manufacturer Xiaomi for forex violations in India – Apr 30, 2022, PGurus.com
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I really don’t understand the issue. Vivo is a glorified importer from China. So if an item is sold in India for Rs 100 it has to be imported and the cost of the item can be upto Rs80 assuming its a low margin item and could be up to Rs 50 if its a high margin item. In this case 50-80% of the turnover has to be sent abroad as the company is an importer. So what exactly is the crime? How will you tax turnover? you can only tax profits which are after paying for the goods.