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India imposes $88mn fine on Xiaomi for evading import taxes

The MI brand mobile phones are sold exclusively to Xiaomi India. Source: BBC. 

NEW DELHI: India has asked the local unit of Chinese smartphone giant Xiaomi to pay 6.53 billion rupees ($87.80 million) in import taxes after an investigation found that the company had evaded some duties.

A probe by India’s Directorate of Revenue Intelligence showed that Xiaomi India’s payment of royalty and licence fees to Qualcomm USA and Beijing Xiaomi Mobile Software, China was not added in the transaction value of imports by the company and its contract manufacturers, the government said in a statement.

A show-cause notice has been slapped on Xiaomi India following recovery of documents during searches on its premises that indicated remittance of royalty and licence fee to US and Chinese firms under contractual obligations, the union finance ministry said.

“By not adding ‘royalty and licence fee’ into the transaction value, Xiaomi India was evading customs duty being the beneficial owner of such imported mobile phones, the parts and components thereof,” the statement said.

Three show-cause notices have been issued to Xiaomi for the tax demand and recovery of 6.53 billion rupees for the period April 2017 to June 2020, it added.

“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,” a spokesperson for the company said.

Investigations further showed that Xiaomi India is engaged in the sale of MI brand mobile phones and these mobile phones are either imported by the company or assembled in India by importing components of mobile phones by contract manufacturers of Xiaomi India.

The MI brand mobile phones manufactured by the contract manufacturers are sold exclusively to Xiaomi India, in terms of the contract agreement.

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