Samsung faces $601 million tax demand from India for alleged import violations

In a major escalation of India’s crackdown on import misclassification, the government has ordered Samsung and its top executives in the country to pay a staggering $601 million (approximately Rs. 5,149 crore) in back taxes and penalties. The tax authority claims the South Korean electronics giant dodged hefty tariffs on key telecom equipment over several years.

The massive tax demand, which could significantly impact Samsung’s bottom line, represents a large portion of the company’s $955 million (around Rs. 8,183 crore) net profit in India last year. The company now faces a battle to challenge the order in a tax tribunal or the courts.

According to a confidential order issued by India’s customs department on January 8, as reported by Reuters, Samsung has been accused of misclassifying imports of a critical transmission component known as the Remote Radio Head (RRH). The device, an essential part of 4G telecom systems fitted on mobile towers, allegedly attracted tariffs of 10 to 20 percent, which Samsung reportedly failed to pay.

The investigation, which began in 2021, involved tax inspectors searching Samsung’s offices in Mumbai and Gurugram, seizing documents and questioning top executives. The company had imported RRH equipment worth $784 million (approximately Rs. 6,717 crore) from Korea and Vietnam between 2018 and 2021 without paying duties.

The tax demand includes 44.6 billion rupees ($520 million) in unpaid taxes and a 100 percent penalty. Additionally, seven of Samsung’s India executives face fines totaling $81 million (around Rs. 694 crore). Among them are the company’s Network Division Vice President Sung Beam Hong, Chief Financial Officer Dong Won Chu, General Manager for Finance Sheetal Jain, and General Manager for Indirect Taxes Nikhil Aggarwal.

Samsung has strongly contested the allegations, maintaining that the classification of the RRH component does not attract tariffs. In a statement, the company said, “The issue involves the interpretation of classification of goods by customs… We are assessing legal options to ensure our rights are fully protected.” The company further stated that its classification practices were previously known and accepted by officials.

Interestingly, Samsung supported its claim with four expert opinions, arguing that the component did not function as a transceiver, which would have justified the duty-free import. However, tax officials countered with letters from 2020, where Samsung allegedly described the component as a transceiver capable of transmitting signals.

This high-profile tax dispute comes at a time when India is tightening its scrutiny over foreign companies’ imports. The case is reminiscent of Volkswagen’s ongoing legal battle over a record $1.4 billion (roughly Rs. 11,995 crore) tax demand for allegedly misclassifying car parts.