Xiaomi challenges India tribunal over $72m royalty tariffs

Xiaomi has challenged an Indian tax tribunal ruling that claimed the company underpaid US$72 million in tariffs on royalty payments, marking a significant legal dispute over customs valuation.

The tribunal’s decision stated Xiaomi’s import values had been undervalued for at least three years before 2020, by excluding royalties paid to foreign firms like Qualcomm for technology use.

Xiaomi argued in the Supreme Court that the tribunal erred in its assessment of the company’s ownership of components and the taxation of royalties, seeking to overturn the ruling. Several former contract manufacturers of Xiaomi are also opposing the decision.

Legal experts say the case could influence how Indian authorities enforce customs and royalty payments, especially as foreign firms continue to invest in the country.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

This tax dispute sits within a broader regulatory fight

A US$72 million tariff case adds to a longer run of probes involving Xiaomi in India.
India’s Enforcement Directorate (a federal agency that investigates financial crime and money laundering) has frozen or attached Xiaomi bank accounts since 2022, while seizing about US$676 million over alleged illegal remittances framed as royalty payments 1.
Xiaomi’s financial reports treat the restricted funds as a cash-flow risk, with the amount valued at about US$545 million as of September 30, 2025 2.
Amid these legal pressures, Xiaomi’s India market share has fallen, leaving India as the only major market where its share shrank in a recent quarter 2.

India’s enforcement raises the stakes for overseas companies

Customs valuation disputes also hit automakers, with Kia and Volkswagen facing tax demands over alleged misclassification of imported parts to cut duties 3.
At the same time, India has rolled out measures meant to draw foreign capital, including a tax rule change that addressed Apple’s concerns.
The rule lets foreign firms supply manufacturing equipment to Indian contract manufacturers in special customs-bonded areas for a limited period, without income tax triggered on that basis alone 4.
The result is a mixed setting where export manufacturing incentives exist, while legal exposure can rise around import classification or royalty payments.