Report: India slaps Samsung with USD 601 million tax penalty due to telecom imports
In a Reuters exclusive, India ordered Samsung to pay USD 601 million in back taxes and penalties on imports of key telecom equipment from 2018 to 2021.
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| File photo: Samsung Galaxy logo MWC 2024 booth in Barcelona, Spain |
Samsung India executives must pay
India's demand is a substantial chunk of Samsung's 2024 net profit of USD 955 million (around PHP 56 billion) in India, where the Korean giant is one of the prominent players in the consumer electronics and smartphones market.
Reuters' report states that the company, which imports telecom equipment through its network division, received warnings in 2023 for misclassifying imports to evade tariffs of 10 or 20 percent on critical transmission components used in mobile towers.
The brand imported and sold these items to billionaire Mukesh Ambani's telecom giant, Reliance Jio.
The investigation on Samsung began in 2021 when tax inspectors searched its offices in the financial capital of Mumbai and Gurugram near New Delhi, seizing documents, emails, and electronic devices. Top executives were reportedly questioned later.
The dispute centers on imports of 'Remote Radio Head', a radio-frequency circuit enclosed in a small outdoor module that the tax officials call "one of the most important" parts of 4G telecom systems.
From 2018 to 2021, Indian officials found that Samsung did not pay dues on imports worth USD 784 million (around PHP 45 billion) of components from Korea and Vietnam.
In the report, Samsung vehemently defended its classification and backed its case with four expert opinions claiming that the component did not perform the functions of a transceiver and could be imported without any duty.
Samsung even pushed India's tax authority to drop the scrutiny, saying the component did not attract tariffs and that officials had known about its classification practice for years.
But India's customs authorities disagreed in a confidential January 8 order that is not public but was reviewed by Reuters.
As counter-evidence, tax officials cited 2020 letters from Samsung addressed to the Indian government that describe the component as a transceiver, which the Indian government said is a 'device which transmits' signals.
Samsung 'violated' Indian laws and 'knowingly and intentionally presented false documents before the customs authority for clearance. Samsung 'transgressed all business ethics and industry practices or standards in order to achieve their sole motive of maximising their profit by defrauding the Indian government exchequer, said Sonal Bajaj, an Indian customs commisioner
Samsung was ordered to pay 44.6 billion Indian Rupees (around USD 520 million or PHP 30 billion), consisting of unpaid taxes and a penalty of 100 percent.
Seven Indian executives also faced fines of over USD 81 million (around PHP 4.7 billion).
In a statement, Samsung says that the issue involves the interpretation of the classification of goods by customs. They are assessing legal options to make sure their rights are fully protected.
The Reuters report highlights India's tougher oversight of foreign companies and its stringent tax enforcements. This has raised concerns among foreign investors.
This is a continuing story and will be updated once significant development occurs.
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