India slaps $601 mn tax demand on Samsung: report

Indian tax authorities have ordered Samsung to pay up more than Rs5,100 crore ($601 million) in back taxes and penalties, alleging it evaded duties on telecom equipment imports, Reuters reported on Tuesday citing an 8 January confidential order issued by the customs department.

The order comes as tax officials crack down on companies allegedly evading import duties and evading taxes.

In the order, Indian customs officials accused Samsung of misclassifying a key telecom component known as the remote radio head (RRH) to avoid import duties ranging from 10% to 20%.

The component, which is required for 4G networks, was imported from Korea and Vietnam between 2018 and 2021.

The authorities reportedly said the company failed to pay duties on shipments worth $784 million (Rs6,717 crore).

Customs authorities also rejected Samsung’s defense, with Sonal Bajaj, a commissioner of customs, stating in the order that the company “knowingly and intentionally presented false documents before the customs authority for clearance.”

The investigation, which began in 2021, involved searches at Samsung’s offices in Mumbai and Gurugram, where officials seized documents and questioned top executives.

In addition to the tax liability of Rs4,460 crore ($520 million), the company faces a 100% penalty, bringing the total demand to Rs5,149 crore.

Moreover, seven of Samsung’s India executives, including vice-president of the network division Sung Beam Hong, chief financial officer Dong Won Chu, general manager for finance Sheetal Jain, and general manager for indirect taxes Nikhil Aggarwal, have been fined a total of $81 million (Rs694 crore).

Meanwhile, the South Korean electronics giant has denied any wrongdoing, and has maintained that the classification of the imported goods was in compliance with existing regulations.

Samsung has reportedly said that it fully complies with the laws in India, with the latest issue involving the interpretation of classification of goods by customs, adding that it is exploring legal options.

Samsung said experts supported its claim that the RRH component was not a transceiver, so it should not be taxed, Reuters reported.

Authorities, however, showed old documents from Samsung that allegedly described the component as a transceiver, which can send signals.

The case is part of India’s wider effort to stop companies from mislabeling imports to avoid taxes.

A similar case involves Volkswagen, which is facing a $1.4 billion tax demand for allegedly misclassifying car parts.

Samsung can now challenge the ruling in a tax tribunal or court.