India tax notice: Haier, Godrej, Blue Star accused of using fake e-waste recycling claims, wrong tax credits

Indian tax authorities have faulted appliance makers Haier, Godrej & Boyce and Blue Star for not detecting documents fabricated by a spurious recycler who did no e-waste work, while relying on them to meet green goals, a government notice showed. The third-biggest generator of e-waste after China and the United States, India has been concerned that 78% of the waste from discarded electronic goods is processed by informal scrap dealers who use methods that harm the environment. Reuters reviewed an August 27 notice sent to the three home appliance majors that detailed the lapses. Indian officials also accused them of wrongly claiming tax credits of $714,000 for recycling services that were never actually rendered. "The foundational activity of procurement, receipt and processing of e-waste itself is not established," the tax officials said in their 550-page notice. Godrej & Boyce and Blue Star said they would respond to the notice and were committed to legal compliance, adding that the recycler concerned had been authorised by the government. Godrej said it followed all government guidelines for recycling, while Blue Star said it had no reason to believe any irregularity but had stopped dealings with the vendor. Haier India said it would continue to cooperate with the authorities and was committed to legal compliance. India's finance ministry did not respond to queries. Alarm among consumer electronics companies The findings have set off alarm in India's $95-billion consumer electronics market as many big companies aware of the case have launched internal reviews of recycling supply chains, three industry executives said on condition of anonymity. Haier and Godrej sell appliances such as refrigerators and washing machines in India, while Mumbai-listed Blue Star specialises in air-conditioning. They compete with market leaders such as Samsung and LG. India allows companies to claim credits for tax paid on services such as recycling, reducing the amount of tax owed on their sales. Penalties for false claims can run up to 100%. The incident follows a January warning by the government against "fraudulent certification" issued by spurious recyclers. Since 2022, Prime Minister Narendra Modi's government has asked companies to recycle a share of the products they sell each year, but most meet those obligations by buying compliance certificates from recyclers who do the actual work. No verification, tax credits The notice cited a little-known Indian recycler, WEEE-PRO Resource Recovery Solutions, as the issuer of the compliance certificates. It accused the three companies of not having verified the vendor was doing actual work, but relying instead on fabricated documents to prove compliance. WEEE-PRO did not respond to Reuters queries. But the notice said its officials denied wrongdoing and disputed the evidence presented during the investigation. The three companies "admitted that they had not independently verified the actual collection, transportation, receipt, dismantling or recycling of the e-waste", which is necessary to claim tax credits, the notice added. Haier wrongly claimed $367,900, Godrej $159,700 and Blue Star $186,600, for a total of about $714,000, the notice said. 'Added clouds' in fake photographs Concerns about use of false documents have prompted tax authorities to widen their investigation through the industry, said two senior government sources. "We are analysing the modus operandi and will ask field officers to investigate," said one of the tax officials, who sought anonymity as the matter is a sensitive one. Investigators scoured scores of WhatsApp messages and documents, and even correlated recorded sunset times with scenes in photographs furnished for compliance purposes, to test if they were genuine. But they were not. The notice included photographs that showed trucks first laden with e-waste, and then empty, but said the images were digitally altered. For example, one 2024 photograph carrying a timestamp of 7:43 p.m., or 29 minutes after sunset, still showed "bright daylight, an illuminated sky and pronounced natural shadows," investigators wrote. In another case, an executive of the recycler WEEE-PRO said he had edited photographs by "adding a few clouds", but defended the action by saying they were never used for commercial purposes and "learning Photoshop was not a crime". "The photographic evidence was manipulated or fabricated and was utilised to falsely substantiate the alleged physical movement of e-waste," the notice said.