Samsung Receives $600 Million Tax Notice from India for Telecom Imports

India has accused South Korean tech giant Samsung of tax cheating in the purchase of necessary telecom equipment and has imposed a $601 million tax demand on the company. One of the largest orders in recent years, it may have a significant impact on Samsung's net profit in India, which was $955 million in 2024. It may be contested in court or before a tax tribunal. The company was warned in 2023 for misclassifying imports to avoid 10% or 20% tariffs on a crucial transmission component used in cell towers. The corporation also imports telecom equipment through its network segment.

Tug of War Between Samsung and Custom Authorities

By arguing that the component did not incur taxes and that officials had been aware of its classification method for years, Samsung persuaded India's tax office to end the investigation. However, customs officials disagreed in a private order dated January 8 that was examined by a media outlet. Samsung "knowingly and intentionally presented false documents before the customs authority for clearance" and "violated" Indian regulations, according to the ruling issued by customs commissioner Sonal Bajaj. Investigators discovered that Samsung violated all industry norms and commercial ethics in order to fulfil their exclusive goal of maximising their profit by cheating the government exchequer, Bajaj continued. Samsung was mandated to pay 44.6 billion rupees ($520 million), which included a 100% penalty and outstanding taxes. It imported and sold these goods to Reliance Jio, the telecom powerhouse owned by billionaire Mukesh Ambani.

The ruling stated that seven executives in India, including Sung Beam Hong, the vice president of the network business, Dong Won Chu, the chief financial officer, and Sheetal Jain, a general manager for finance, as well as Nikhil Aggarwal, Samsung's general manager for indirect taxation, face fines of $81 million.

Samsung’s Response

In a statement, Samsung stated that it conformed with Indian legislation and that the problem was with the way customs classified the goods. To make sure its rights are completely safeguarded, the business is evaluating its legal options. The event occurs when India tightens its regulations on foreign businesses and their imports. Due to incorrectly classifying automobile parts, Volkswagen is contesting a record demand of $1.4 billion in import back taxes in a legal dispute with New Delhi. The issue has reignited the concerns of foreign investors regarding tax battles, but the German corporation denies any wrongdoing in what it described as a "matter of life and death" for its India operation.

The Samsung probe started in 2021 when tax officials raided the company's offices in Gurugram, which is close to New Delhi, and Mumbai, the financial capital, and confiscated records, emails, and a few electronic devices. Later, senior executives were questioned. A radio-frequency circuit housed in a compact outside module, the "Remote Radio Head" is "one of the most important" components of 4G telecom networks, according to tax officials, and its imports are at the heart of the Samsung controversy.