Samsung faces whopping $600M tax payment in India: Here's why
What's the story
India has slapped a tax demand of $601 million on South Korean tech giant Samsung, accusing it of tax evasion in the import of essential telecom equipment.
The order, one of the biggest in recent years, could affect a major chunk of Samsung's net profit in India which stood at $955 million in 2024.
The company is now mulling contesting this demand in a tax tribunal or court.
Tax disputes
Allegations of tariff evasion and import misclassification
The tax demand arises from allegations that Samsung misclassified imports to evade 10-20% tariffs on a key transmission component used in mobile towers.
The component was reportedly imported and sold to billionaire Mukesh Ambani's Reliance Jio.
Samsung had earlier contested the taxes, arguing that the component didn't attract tariffs and that officials were aware of its classification practice for years.
Official response
Customs authorities disagree with Samsung's stance
However, customs authorities rejected Samsung's argument in a confidential order dated January 8.
According to Sonal Bajaj, a commissioner of customs, "Samsung violated Indian laws and knowingly and intentionally presented false documents before the customs authority for clearance."
Investigators also found that Samsung "transgressed all business ethics and industry practices or standards in order to achieve their sole motive of maximizing profit by defrauding the government exchequer," Bajaj added.
Financial impact
Tax and penalties imposed on Samsung
Samsung has been directed to pay $520 million, including unpaid taxes and a 100% penalty.
Seven of its executives in India are also facing fines amounting to $81 million.
Those fined include the network division's vice president, Chief Financial Officer, a general manager for finance, and Samsung's general manager for indirect taxes.
Regulatory trend
India's increasing scrutiny of foreign companies
This incident underscores India's growing scrutiny of foreign companies and their imports.
The action comes amid a legal battle between Volkswagen and New Delhi over a record $1.4 billion demand in import back taxes on grounds of misclassifying car parts.
The Samsung investigation started in 2021 when tax inspectors raided its offices in Mumbai and Gurugram, seizing documents, emails, and some electronic devices.