Xiaomi India Faces Rs. 653 Crore Fine For Alleged Tax Evasion

Recently, the Union Ministry of Finance issued a notice to the Chinese smartphone maker Xiaomi India's unit. The company has been ordered to pay a fine of Rs. 653 crore for alleged violation of Customs Act. It has been noted that the company did not include license and royalty fees in the value of its imports.

Moreover, the Ministry of Finance has also issued a show-cause notice to Xiaomi India following the recovery of documents during the search in its unit. These documents indicated the remittance of royalty and license see to the Chinese and US firms under contractual obligations, stated the Union Finance Ministry.

Xiaomi India Faces Fine!

Going by the same, a Xiaomi spokesperson has told a news agency that Xiaomi India gives utmost importance to ensure that they comply with the Indian laws. Currently, they are reviewing the notice issued by the ministry of finance in detail. As a responsible company, they intend to support the authorities with all necessary documentation.

Furthermore, the evidence gathered during the investigations by the Directorate of Revenue Intelligence (DRI) indicated that neither Xiaomi India nor its contract manufacturers included the royalty amount paid by the firm in the assessable value of the goods that were imported by the company as well as its contract manufacturers that added to the violation of the customs law, stated the ministry of finance.

Notably, the finance ministry went on to state that the beneficial owner of these imported mobile phones, Xiaomi India had evaded customs duty by failing to add royalty and license fees in its transaction value. Post the investigation by the DRI, three show-cause notices were issued to M/s Xiaomi Technology India Private Limited for the recovery and demand of duty, which is Rs. 653 crores. This was for the period between April 1, 2017 and June 30, 2020 under the Customs Act, 1962.

The investigation probe hinted that Xiaomi India is engaged in the sale of mobile phones under the Mi brand and these were either imported by the company or assembled in the country by importing components to be used by these devices by control manufacturers. Notably, the searches were conducted by the DRI at the Xiaomi India premises.