India authorities asked the local unit of Xiaomi to pay 6.53 billion rupees ($87.80 million) in import taxes after an investigation found that the Chinese smartphone giant had evaded some duties, Reuters reported on Wednesday.

According to the report, a probe by India's Directorate of Revenue Intelligences revealed that Xiaomi India's payment of royalty and license fees to Qualcomm USA and Beijing Xiaomi Mobile Software Co Ltd, China was not included in the transaction value of the company's and its contract manufacturers' imports.

“By not adding “royalty and license 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 regulator said in a statement released on Wednesday.

Three show-cause notices have been issued to Xiaomi for the tax demand and recovery of 6.53 billion rupees for the period April 2017 to June 2020, it added.

In response, a spokesperson for the Chinese company said,“at Xiaomi India, we give utmost importance to ensuring we comply with all Indian laws. We are currently reviewing the notice in detail. As a responsible company, we will support the authorities with all necessary documentation.” 

On December 31, Economic Times reported that Indian tax department raided Xiaomi and Oppo, because these two Chinese smartphone manufacturers were deemed to have violated the law pertaining to non-disclosure of related party transactions. The department is also probing the two companies for alleged bogus borrowings of over 50 billion rupees. 

According to Counterpoint's report on Indian smartphone shipments in Q3 2021, Chinese smartphone firms Xiaomi, Vivo, Realme, and Oppo were the best performers. Xiaomi led the Indian smartphone market shipments in Q3, accounting for 22% of the total.

As geopolitical risks rise, Chinese companies may face increasing challenges in India. In the past year, citing national security concerns, India banned hundreds of Chinese apps, including ByteDance's TikTok, Tencent’s WeChat, and Alibaba’s UC Browser.