India asks Xiaomi to pay nearly $88 million in import taxes

An attendee holds a Xiaomi Corp. Mi A1 dual camera device during the smartphone’s launch in New Delhi, India, on Tuesday, Sept. 5, 2017.

Anindito Mukherjee | Bloomberg | Getty Images

India has demanded the local arm of Chinese smartphone maker Xiaomi to pay 6.53 billion rupees ($87.8 million) in import taxes, following an investigation.

The Directorate of Revenue Intelligence carried out a probe which led to the recovery of documents during searches of Xiaomi India premises, a Finance Ministry statement said Wednesday.

“During the investigations, it further emerged that the ‘royalty and licence fee’ paid by Xiaomi India to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd., China (related party of Xiaomi India) were not being added in the transaction value of the goods imported by Xiaomi India and its contract manufacturers,” it said.

“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,” the statement added.

After completing the investigation, the DRI issued three “show cause” notices to Xiaomi related to the recovery of 6.53 billion rupees for the period between April 2017 and June 2020. These notices are a type of court order that requires one or more of the parties to a case to justify, explain or prove something to the court.

Xiaomi did not respond to CNBC’s request for comment.

This is not the first time India has taken action against Chinese technology companies.

Last year, the South Asian nation banned 118 apps with links to China, citing national security risks. It came at the height of geopolitical tensions between both countries.

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