Xiaomi slapped with notices for evading Rs 653 crore customs responsibility

The Finance Ministry on Wednesday issued three show-cause notices to Chinese cellphone maker Xiaomi’s India unit ‘Xiaomi Technology India’ for evading customs responsibility by means of undervaluation. With notices, the tax authorities are demanding Rs 653 in tax from the corporate. This is after an in depth investigation was initiated by the Directorate of Revenue Intelligence (DRI) in opposition to Xiaomi India and its contract producers.
The DRI recovered paperwork on the premises of Xiaomi India indicating that the corporate was remitting royalty and license charge to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd., beneath contractual obligation. But the identical was not reported by the corporate, evading import responsibility. “By not adding royalty and licence fee in the transaction value, Xiaomi India was evading customs duty, being the beneficial owner of such imported mobile phones, the parts and components thereof”, the ministry stated in its official assertion.
Three present trigger notices issued to Xiaomi Technology India for demand & restoration of responsibility amounting to Rs 653 cr for the interval 01.04.2017 to 30.06.2020, beneath the provisions of the Customs Act, 1962: Ministry of Finance— ANI (@ANI) January 5, 2022
The investigation by DRI revealed that Xiaomi India is engaged within the sale of MI model cellphones and these cellphones are both imported by the corporate or assembled in India by importing parts of cellphones by contract producers 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”, the assertion added.
The probe discovered that whereas Xiaomi India was paying royalty and licence charges to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd., China for the parts and cellphones imported to India, the identical was not being added to the assessable worth of the products imported by Xiaomi India and its contract producers. This is a violation of Section 14 of the Customs Act, 1962 and Customs valuation (willpower of worth of imported items) Rules 2007, the Finance Ministry stated.
Therefore, three present trigger notices have been issued to M/s Xiaomi Technology India Private Limited for demand and restoration of responsibility amounting to Rs. 653 crore for the interval 01.04.2017 to 30.06.2020, beneath the provisions of the Customs Act, 1962, the ministry knowledgeable.
It is claimed that the important thing individuals of Xiaomi India and its contract producers have confirmed the funds. This is every week after the Income Tax Department had indicated that Chinese cell phone producers Xiaomi and Oppo may face fines of as much as Rs 1,000 crore for violating the legislation.
The Income Tax Department had performed searches on main Chinese cellular corporations throughout the nation on December 21. The searches have been performed in workplaces of Oppo, Xiaomi, and One Plus in Delhi and 11 states together with, Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan.
The extreme search by the Office then had revealed that two main corporations have made remittance within the nature of royalty, to and on behalf of its group corporations positioned overseas, which aggregates to greater than Rs 5500 crore. “These companies have not complied with the regulatory mandate prescribed under the Income-tax Act, 1961 for disclosure of transactions with associated enterprises. Such lapse makes them liable for penal action under the Income-tax Act, 1961, the quantum of which could be in the range of more than Rs 1000 crore”, the assertion had learn.