Xiaomi India gets Rs 653-crore notice for alleged import duty evasion

Neither Xiaomi India nor its contract manufacturers were including the amount of royalty amount paid in the value of goods imported.

Highlights
  • Xiaomi India has seemingly evaded custom duty of around Rs 653 crores by undervaluation.
  • Xiaomi India was omitting royalty and license fees paid to Qualcomm USA and to Beijing Xiaomi Mobile Software, under contractual obligation.
  • This is a violation of section 14 of the customs act, 1962 and Customs valuation (determination of the value of imported goods) Rules 2007.

Chinese smartphone brand Xiaomi could soon be facing the heat as the company has seemingly evaded custom duty of around Rs 653 crores in India, according to Finance Ministry. Based upon intelligence that M/s Xiaomi Technology India Private Limited (Xiaomi India) is evading customs duty by undervaluation. An investigation was initiated by the Directorate of Revenue Intelligence (DRI) against Xiaomi India and its contract manufacturers. However, in contrast, Xiaomi India in a statement said that it gives utmost importance to ensure it complies with all Indian laws. This comes days after the income tax raids on Xiaomi and its manufacturers

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After completion of the investigation by the DRI, three show-cause notices have been issued to M/s Xiaomi Technology India Private Limited for demand and recovery 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,” the Finance Ministry said in a statement.

As a part of the investigation, searches were conducted by the DRI at the premises of Xiaomi India that led to the recovery of documents that suggest the company was omitting royalty and license fees paid to Qualcomm USA and to Beijing Xiaomi Mobile Software, under contractual obligation.

Statements of key persons of Xiaomi India and its contract manufactures were recorded, during which one of the directors of Xiaomi India confirmed the said payments,” the Finance Ministry said.

In a further revelation by DRI, Xiaomi India is engaged in selling Mi phones that were either imported by Xiaomi India or assembled in the country by importing parts and components of mobiles by contract manufacturers of Xiaomi India. The Mi-branded phones manufactured by the contract manufacturers are sold exclusively to Xiaomi India as per the contract agreement.

Evidence gathered during the investigation by the DRI showed that neither Xiaomi India nor its contract manufacturers were including the amount of royalty paid in the value of goods imported. This is a violation of section 14 of the customs act, 1962 and Customs valuation (determination of the value of imported goods) Rules 2007. The company said it would support the authorities with all necessary documentation.