Xei India fined Rs 653 crore for evasion of Customs duty

On Wednesday, Xiaomi India was fined Rs 653 crore for evasion of customs duty by the Ministry of Finance. China State-affiliated media Global Times stated that the penalty was due to disagreements on how to determine the price for imported goods.

The tax issue in India is caused by the disagreement on how to determine the price of imported goods, according to a $88 million fine issued by the Indian Ministry of Finance for evasion of customs duties. In a statement, Xiaomi said that the price of imported goods is a complex and technical challenge, as mentioned by Global Times. From April 1, 2017 to June 30, 2020, Xiaomi said that it will continue to communicate with the responsible Indian authorities and that it always complies with the relevant laws and regulations of the places where it operates. The company stated that it was not related to Xiaomi's recent business, as mentioned in the Chinese news site. The statement from the government is not the final decision.

The ministry has been investigating a company company's customs evasion charges based on intelligence, according to the statement. The Directorate of Revenue Intelligence DRI initiated an investigation against Xiaomi India and its contract manufacturers.

The DRI had conducted searches at the premises of Xiaomi India, leading to the recovery of documents indicating that the company was remitting royalty and license fee to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd. under contractual obligation, the ministry said. The ministry said that key individuals of key individuals of Xiaomi India and its contract manufacturers were recorded during which one of the directors of Xiaomi India confirmed the payments.

The license fee for Qualcomm and Beijing Xiaomi Mobile Software was not included in the transaction value of goods imported by Xiaomi India and its contract manufacturers.

Evidence gathered during the investigations by the DRI indicated that neither Xiaomi India nor its contract manufactures included the amount of royalty paid by Xiaomi India in the assessable value of goods imported by Xiaomi India and its contract manufacturers, which is in violation of Section 14 of the Customs Act, 1962 and Customs valuation determination of the value of imported goods Rules 2007. The ministry said that by not adding a royalty and licence fee into the transaction value, Xiaomi India was evading Customs duties by not adding a license fee and having a beneficial owner of such imported mobile phones, the parts and components thereof.

Three show cause notices were issued to Xiaomi Technology India amounting to 653 crore for the period from April 1, 2017 to June 30, 2020.