India Demands USD 601 Million in Back Taxes From Samsung Over Telecom Imports
- tech360.tv
- Mar 26
- 3 min read
India has ordered Samsung and its executives to pay USD 601 million in back taxes and penalties for allegedly evading tariffs on key telecom equipment imports, according to a government order. This is one of the largest tax demands in recent years.
The demand represents a significant portion of Samsung’s net profit in India, which stood at USD 955 million last year. The company, a major player in the consumer electronics and smartphone market, can challenge the order in a tax tribunal or court.
Samsung, which imports telecom equipment through its network division, was warned in 2023 for allegedly misclassifying imports to avoid tariffs of 10% or 20% on a critical transmission component used in mobile towers. The company imported and sold these components to Reliance Jio, owned by billionaire Mukesh Ambani.
Samsung argued that the component was not subject to tariffs and that officials had been aware of its classification for years. However, customs authorities disagreed in a confidential order dated 8 Jan., reviewed by Reuters.
The order, issued by Customs Commissioner Sonal Bajaj, stated that Samsung violated Indian laws and knowingly submitted false documents to customs authorities. Investigators accused the company of disregarding business ethics and industry standards to maximise profits by defrauding the government.
Samsung has been ordered to pay INR 44.6 billion (USD 520 million) in unpaid taxes and penalties. Additionally, seven India-based executives face fines totalling USD 81 million. Among them are Sung Beam Hong, vice president of the network division; Dong Won Chu, chief financial officer; Sheetal Jain, general manager for finance; and Nikhil Aggarwal, general manager for indirect taxes.
Samsung stated that the issue concerns the interpretation of goods classification by customs and insisted that it complies with Indian laws. The company is assessing legal options to protect its rights.
India’s customs authority and finance ministry did not respond to queries. Reliance Jio also did not comment on the matter.
The case comes as India increases scrutiny of foreign companies and their imports. Volkswagen is currently in a legal battle with Indian authorities over a record USD 1.4 billion tax demand related to the alleged misclassification of car parts. The German automaker denies any wrongdoing and has called the dispute a "matter of life and death" for its India operations.
Investigation Into Samsung’s Imports
The investigation into Samsung began in 2021 when tax inspectors searched its offices in Mumbai and Gurugram, seizing documents, emails, and electronic devices. Top executives were later questioned.
The dispute centres on the import of the "Remote Radio Head," a radio-frequency circuit enclosed in a small outdoor module. Tax officials described it as "one of the most important" components of 4G telecom systems.
Between 2018 and 2021, Indian officials found that Samsung paid no duties on imports worth USD 784 million of this component from Korea and Vietnam. The government argues that the component, which is fitted on telecom towers to transmit signals, is subject to tariffs. Samsung, however, disputes this classification.
Samsung defended its position with four expert opinions, arguing that the component does not function as a transceiver and should be exempt from duties. However, tax officials cited 2020 letters from Samsung to the Indian government in which the company described the component as a transceiver, which the government defines as a device that transmits signals.
The tax commissioner stated that Samsung was fully aware of the correct classification of the imported goods.
India has ordered Samsung to pay USD 601 million in back taxes and penalties.
The dispute involves the classification of telecom equipment imported by Samsung.
Seven Samsung executives in India face fines totalling USD 81 million.
Source: REUTERS
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