Xiaomi India is in trouble, yet again. The latest development shows that the Indian government has slapped the Chinese smartphone manufacturer Xiaomi with Rs 653 crore notice for tax evasion. The Finance Ministry confirmed the development on Wednesday, as reported by Press Trust of India (PTI).
As per reports, the Directorate of Revenue Intelligence (DRI) has issued three cause notices to Xiaomi India for recovery of Rs 653 crore for the period 01.04.2017 to 30.06.2020, under the provisions of the Customs Act, 1962.
“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 official statement from Finance Ministry stated.
In the last month, the DRI conducted several searches at the Xiaomi India office as well as at its supplier’s factory. The report suggests that DRI recovered incriminating documents from the premises of Xiaomi India, which indicated that the company remitted royalty and licence fee 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 noted.
The ministry further highlighted that the “royalty and licence fee” paid by Xiaomi India to Qualcomm USA and to Beijing Xiaomi Mobile Software, China were not added to the transaction value of the goods imported by Xiaomi India and its contract manufacturers.
The DRI investigation discovered that “Xiaomi India is engaged in the sale of MI brand mobile phones and these mobile phones are either imported by Xiaomi India or assembled in India by importing parts and components of mobile phones by contract manufacturers of Xiaomi India.”
DRI further highlighted that neither Xiaomi India nor the contract manufacturers were adding the royalty amount paid by Xiaomi India in the assessable value of the goods imported by Xiaomi India and its contract manufacturer. This is a clear violation of Section 14 of the Customs Act, 1962 and Customs valuation (determination of value of imported goods) Rules 2007.
The Finance Ministry explained that 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”.
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