TikTok, ByteDance Photo: VCG

The Indian government's reported action against ByteDance, which owns short-video platform TikTok, is reflective of the current situation for Chinese app services providers in the country amid a government crackdown on taxation transparency, Chinese analysts and investors said on Wednesday.

India authorities reportedly froze at least two of ByteDance's bank accounts in the country on the grounds of evasion of certain taxes in online advertising. The company is involved in legal proceedings on the matter.

Richard Ma, an internet industry practitioner who worked in the Indian technology sector last year, told the Global Times on Wednesday that the tax evasion allegation is an unavoidable subject for online streaming platforms such as TikTok, and there are no clear rules governing the sector in India.

Tax authorities in various countries often believe that multinational platforms operating in their jurisdictions fail to pay enough tax, as demonstrated by the previous tussle between US social media giant Facebook and the Australian government. 

TikTok is banned in India, and the company laid off its staff, according to media reports in February.

Sha Jun, executive partner at the India Investment Services Center of the Yingke Law Firm, told the Global Times on Wednesday that the case should be seen as an independent one and viewed separately from Indian government's renewed intention to grant approvals to Chinese investment projects.

However, it can be said that the Chinese companies still operating in India are rather concerned over the reputation and credibility of the Indian government and the country's business environment, Sha said.

"Unlike Chinese law enforcement, which just freezes the amount of funds potentially associated with the alleged crime, the Indian authority freezes a company's entire bank account," Sha said, noting that the Indian practice often leaves a company in a state of complete paralysis.

The Indian government began cracking down on Chinese companies in 2020. The country banned over 100 Chinese apps as bilateral relations deteriorated after a deadly border clash.

India in 2020 tightened its foreign direct investment laws, with an eye on Chinese investment, which caused delays of about $2 billion worth of business deals. 

"At any rate, the lack of transparency regarding the foreign company amid the Indian government's purge of the foreign company's dealings in India, and the tough measures that it has taken, have resulted in an exodus of a large number of Chinese companies," Ma said.

The Indian government has tightened its capital controls and rules on international settlement, making it nearly impossible for Chinese companies to remit their earnings, Ma noted.

"Now only the apps that have the clearest pattern of cash flow, such as e-commerce and livestreaming, dare to stay in India, while others figure it would be better to leave the market," Ma said. "What is the point of staying if you cannot remit your profits?"

Chinese investment into Indian startups plummeted in 2020 to $263 million from 2019's $1.23 billion, according to data compiled by statista.com.