India's Tax Crackdown: Govt Orders Samsung To Pay $601 Million For Import Violations

The order, one of the largest tax demands in recent years, accuses the company of deliberately evading tariffs on key transmission components used in mobile towers.

Samsung, a dominant player in India's consumer electronics and smartphone market, reported a net profit of $955 million last year.

Source : Samsung

India's tax authorities have ordered South Korean electronics giant Samsung and its executives in the country to pay $601 million in back taxes and penalties over allegations of misclassifying telecom equipment to avoid import duties. The order, one of the largest tax demands in recent years, accuses the company of deliberately evading tariffs on key transmission components used in mobile towers.

Samsung, a dominant player in India's consumer electronics and smartphone market, reported a net profit of $955 million last year. The tax demand, which constitutes a significant portion of its earnings, can be contested in a tax tribunal or the courts, reported Reuters.

The dispute stems from Samsung's network division, which imports telecom equipment. In 2023, tax authorities issued a warning, alleging that the company misclassified crucial components to bypass tariffs of 10 per cent or 20 per cent.

These imported components were supplied to Reliance Jio, the telecom arm of billionaire Mukesh Ambani’s business empire. Samsung maintained that the items in question were not subject to tariffs, arguing that its classification method has been long recognised by customs officials.

Customs Authorities Reject Samsung's Defence

However, Indian authorities dismissed this defence in a confidential order dated January 8, reviewed by the news agency. The order stated that the company had "knowingly and intentionally presented false documents before the customs authority for clearance."

Sonal Bajaj, a customs commissioner, noted in the order that Samsung was in violation of Indian laws, accusing the company of disregarding industry standards in pursuit of profit.

The company has been directed to pay Rs 44.6 billion rupees in unpaid taxes, alongside a penalty equal to the tax amount. Additionally, seven India executives, including network division vice president Sung Beam Hong, Chief Financial Officer Dong Won Chu, finance general manager Sheetal Jain, and indirect tax general manager Nikhil Aggarwal, have been fined a total of $81 million.

Growing Tax Scrutiny on Foreign Firms

Samsung responded to the allegations, stating, "The issue involves the interpretation of classification of goods by customs." The company reaffirmed its compliance with Indian laws and said it was "assessing legal options to ensure our rights are fully protected."

The tax dispute emerges against the backdrop of India's increasing scrutiny of foreign companies and their imports. In a parallel case, German automaker Volkswagen is locked in a legal battle over a $1.4 billion tax demand for alleged misclassification of car parts. The company has denied any wrongdoing, describing the dispute as "a matter of life and death" for its operations in India.