Xiaomi India slapped with $88 million notice for alleged tax evasion

India’s Directorate of Revenue of Intelligence (DRI) has issued three show-cause notices to the Indian subsidy of Chinese smartphone maker Xiaomi India for demand and recovery of duty amounting to Rs 653 crore ($87.80 million) for the period of 1st April 2017 to 30th June 2020.

The DRI’s probe showed that Xiaomi India’s payment of royalty and license fees to Beijing Xiaomi Mobile Software Co Ltd, China, and Qualcomm USA was not tallied in the transaction value of imports by the company and its contract manufacturers, the Indian government said in a statement.

The DRI had also searched Bharat FIH, Dixon Technologies, and Foxconn’s India Unit. Dixon Technologies and Bharat FIH are contract manufacturers for Xiaomi India.

India’s Income Tax Department had also conducted searches at another Chinese smartphone maker Oppo and its partners’ premises across various other Indian states. Last week, India’s tax authority said the two smartphone companies could be fined Rs 1,000 crore ($134.45 million) for non-compliance with the law about non-disclosure of related-party transactions, among other violations.

The DRI’s investigation showed that Xiaomi India, which is engaged in the sale of MI brand mobile phones, is either imported by Xiaomi India or assembled in the country by importing components and parts of the smartphones by contract manufacturers Xiaomi India.