India’s tax authorities have demanded Samsung and its local executives to pay $601 million as back taxes and penalties for allegedly evading tariffs whilst importing essential telecommunications equipment, a Reuters report says. This represents one of the largest tax demands in recent times.
The tax demand constitutes a significant portion of Samsung’s net profit in India, which stood at $955 million last year. The company maintains a strong presence in India’s consumer electronics and smartphone sectors. Samsung retains the right to contest this decision through tax tribunals or legal proceedings, the report said.
In 2023, the company’s network division received a warning for incorrectly classifying imports to avoid paying tariffs of 10% or 20% on a crucial transmission component used in mobile tower infrastructure. These components were subsequently supplied to Reliance Jio, owned by billionaire Mukesh Ambani, the Reuters report said.
Samsung attempted to persuade Indian tax authorities to abandon their investigation, asserting that the component was tariff-exempt and that officials had previously accepted their classification methodology for years.
However, in a private order dated January 8, which Reuters accessed, customs authorities rejected Samsung’s arguments. According to Sonal Bajaj, a customs commissioner, Samsung “violated” Indian regulations and “knowingly and intentionally presented false documents before the customs authority for clearance”.
According to Bajaj, the investigation revealed that Samsung “transgressed all business ethics and industry practices or standards in order to achieve their sole motive of maximising their profit by defrauding the government exchequer”.
The company received orders to pay 44.6 billion rupees ($520 million), comprising unpaid taxes and a complete penalty of 100%.
The order indicated that seven India executives, including the network division’s vice president Sung Beam Hong, Chief Financial Officer Dong Won Chu, finance general manager Sheetal Jain, and indirect taxes general manager Nikhil Aggarwal, face penalties totalling $81 million, the Reuters report said.
Samsung issued a statement explaining that the matter concerns the interpretation of customs classification of goods, whilst asserting their compliance with Indian regulations. They stated, “We are assessing legal options to ensure our rights are fully protected.”
