Xiaomi India Faces A Notice For Alleged Tax Evasion Worth Rs. 653 Crore

Chinese phone maker Xiaomi avoided custom duty to the tune of Rs. 653 crore in India, Finance Ministry stated on Wednesday. Based upon an intelligence that M/s Xiaomi Technology India Private Limited (Xiaomi India) was evading customs obligation with the aid of using manner of undervaluation, an research was initiated with the aid of using the Directorate of Revenue Intelligence (DRI) towards Xiaomi India and its contract manufacturers.

Xiaomi provided the following statement:

“At Xiaomi India, we give utmost importance to ensuring we comply with all Indian laws. We are currently reviewing the notice in detail. As a responsible company, we will support the authorities with all necessary documentation.”

“After completion of the research with the aid of using the DRI, 3 show cause notices had been issued to M/s Xiaomi Technology India Private Limited for call for and healing of duty amounting to Rs. 653 crore for the period 01.04.2017 to 30.06.2020, under the provisions of the Customs Act, 1962,” Finance Ministry stated in a statement.

During the research, searches had been carried out with the aid of using the DRI on the premises of Xiaomi India, which caused the recovery of incriminating documents indicating that Xiaomi India was remitting royalty and licence price to Qualcomm USA and to Beijing Xiaomi Mobile Software, under contractual obligation.

“Statements of key people of Xiaomi India and its settlement manufactures have been recorded, for the duration of which one of the administrators of Xiaomi India showed the stated payments,” the Finance Ministry stated. It similarly emerged that the “royalty and licence fee” paid with the aid of using Xiaomi India to Qualcomm USA and to Beijing Xiaomi Mobile Software, China (related party of Xiaomi India) have been not being added withinside the transaction cost of the products imported with the aid of using Xiaomi India and its contract producers, it stated.

The investigations carried out with the aid of using the DRI similarly confirmed that Xiaomi India is engaged withinside the sale of MI emblem cellular telephones and those mobile phones are both imported by Xiaomi India or assembled in India by uploading elements and additives of mobile phones through contract manufacturers of Xiaomi India.

The Mi brand mobile phones manufactured with the aid of using the contract producers are bought solely to Xiaomi India, in terms of the contract agreement.

Evidence accrued for the duration of the investigations with the aid of using the DRI indicated that neither Xiaomi India nor its contract manufactures have been which include the quantity of royalty paid with the aid of using Xiaomi India withinside the assessable cost of the products imported with the aid of using Xiaomi India and its settlement producers, that’s in violation of Section 14 of the Customs Act, 1962 and Customs valuation (determination of value of imported goods) Rules 2007.

By not adding “royalty and licence fee” into the transaction cost, Xiaomi India become evading Customs obligation being the beneficial proprietor of such imported mobile phones, the elements and components thereof, the Finance Ministry stated.

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