Beijing has failed to act against corruption and criminality that Chinese government-affiliated companies habitually use in South Asia to gain an unfair advantage.
According to a report from the Directorate General of GST Intelligence in India, many Chinese companies were found involved in tax evasions. They were availing fraudulent Input Tax Credit (ITC) from certain firms without actual receipt of goods or services.
The report states such companies are also charging and collecting GST from their customers and not depositing the same.
Some Chinese companies in collusion with Indian companies were issuing fake invoices to different Chinese firms/companies having Chinese nationals as directors without actual supply of services.
There is a long list of Chinese companies involved in financial impropriety.
In December 2021, the IT department carried out search operations on Chinese smartphone makers and sellers Xiaomi and Oppo and found that both companies had not complied with the regulatory mandate prescribed under the Income-tax Act, 1961 for disclosure of transactions with associated enterprises. Such lapses make them liable for penalties of up to Rs 1,000 crore.
In another instance, Chinese firms engaged in the business of chemicals, ball bearings, machinery parts and injection-molding machinery were raided (November 2021) by the Indian Income-tax department as they were involved in tax evasion through manipulation of books of accounts.
Search operations covering about 20 premises across the country revealed that these firms had transferred nearly 20 crores to China via a network of shell entities in the last two years.
Some Chinese entities including those which had good business in India deliberately indulged in tax evasion as evident from the case of ByteDance.
The Goods and Services Tax (GST) authorities froze (2020) the accounts of ByteDance over alleged tax evasion and not paying its GST dues in full.
It has emerged that Chinese nationals opened shell companies and bank accounts, as well as operated dummy mobile phone numbers using Indian SIM cards.
Indian government being aware of the rising non-compliance and tax evasion, directed the Registrar of Companies (ROC) to set up Chinese cells across the country to probe shell firms involving Chinese nationals. These shell firms were apparently linked to online betting, loan, dating & gambling apps and had collected hundreds of crores.
There are instances of money laundering by Chinese companies from India.
The Enforcement Directorate (ED) arrested (2020) a crypto-currency trader in this regard in connection with an online Chinese betting scam. The business of websites hosted from outside India and operated by Chinese nationals was estimated to be over Rs 1,100 crore.
Chinese companies have also penetrated into the Indian credit market and were exploiting Indian borrowers.
During the pandemic-induced lockdown, scores of Chinese-owned micro-lending apps started operating in India under very shady terms.
Claiming to play fair, Chinese instant-loan apps Momo, CashBus, Timely Cash, Y Cash, Kissht, Robo Cash, Fast Rupee, Cash Mama, and Loan Time were offering payday loans to Indians, targeting borrowers on the lower end of the earnings scale.
Many of these apps show more than a million installs. Borrowers were charged exorbitant processing fees and interest rates pushing many lower-middle-class people into the debt trap and forcing them into suicide.
Violating local rules, Shopee, a Chinese e-commerce company, began operations under a complex corporate structure across Singapore and the Cayman Islands to hoodwink the Indian government about its origin.
The Confederation of All India Traders (CAIT) complained about it to the competition regulator, seeking action against Shopee for alleged unauthorised entry in the country.
Estimates suggest that Beijing is also responsible for the largest Illicit Financial Flows (IFFs) related to corrupt business practices, by value globally.
It was against this backdrop, the Indian government has started designing and implementing safeguard measures.
