Finance Ministry Catches Xiaomi India Evading Tax Duties Of INR 653 Cr

SUMMARY

Xiaomi India was remitting royalty and licence fees to Qualcomm USA and to Beijing Xiaomi Mobile Software Co Ltd

Further investigations revealed that these royalty and license fees were not added to the transaction value of goods imported by Xiaomi India and its contract manufacturers

Authorities have issued three show-cause notices to Xiaomi demanding tax duty of INR 653 Cr for the period between 1 April 2017 and 30 June 2020

The Finance Ministry said Chinese smartphone and IoT device manufacturer Xiaomi has evaded INR 653 Cr with tax duties.

Earlier, we had reported on how Chinese smartphone makers Oppo and Xiaomi could face fines of up to INR 1,000 Cr after violating tax law. As per the authority, the smartphone company claimed expenses amounting to INR 5,500 Cr that the Income Tax department deemed inappropriate.

Based on some intelligence received, the Directorate of Revenue Intelligence (DRI) initiated an investigation against Xiaomi India and its contract manufacturers. Searches conducted at the company’s premises during the investigation led to the recovery of incriminating documents, according to the Finance Ministry

The ministry said, Xiaomi India was remitting royalty and licence fees to Qualcomm USA and to Beijing Xiaomi Mobile Software Co Ltd. Further investigations revealed that these royalty and license fees were not added to the transaction value of goods imported by Xiaomi India and its contract manufacturers.

The ministry further added that Xiaomi India was evading customs duty, in contravention of Section 14 of the Customs Act, 1962 and Customs Valuation (determination of value of imported goods) Rules 2007 by not adding these fees to the transaction value.

Authorities have issued three show-cause notices to Xiaomi demanding tax duty of INR 653 Cr for the period between 1 April 2017 and 30 June 2020 under the provisions of the same act.

Last month, we had also written on the raids conducted by the department at the offices and other facilities of Oppo, Xiaomi and their distribution partners.

According to media reports, more than 30 locations were raided in Tamil Nadu, with 10 of them being in Chennai. Contract manufacturer Foxconn’s Kanchipuram facility was reportedly one of the facilities raided. Similarly, searches were conducted at more than 15 addresses across the Delhi-NCR region.

“Various premises in the states of Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan, Delhi & NCR have been covered in the action,” said the I-T department.