Samsung Takes on INR 4,300 Crore Tax Demand in India, Cites Reliance Precedent

Samsung Electronics has started a legal process against a tax demand of INR 4,300 crore (approximately $520 million) from Indian tax authorities. The dispute centers on a particular piece of telecommunication equipment, the Remote Radio Head, a key component for 4G networks, that Samsung imported from South Korea and Vietnam between 2018 and 2021. According to the tax authorities, this component was not classified properly and was therefore brought into the country without paying the requisite import duties, which should have been at least 10% and might have been as much as 20%. 

One of India's biggest consumer electronics spaces is still manned by a South Korean firm that has long seemed to be on the right side of the customs authorities. For the longest time, in fact, Samsung seemed to be doing everything its competitors weren't, in terms, at least, of avoiding a confrontation with the customs authorities. For the past several years, since 2017, Samsung's customs practices have been under a microscope. Starting in January 2021, the customs authorities have been taking a very critical view of those practices, with Samsung ordered to pay a total penalty of $1.5 billion (Rs 11,000 crore) since then.

Reliance’s Role in the Argument

Strengthening its case, Samsung has invoked the import history of Reliance Jio itself. Filings with the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Mumbai show that Reliance had used a nearly identical method of classification for the very same type of equipment before 2017. Yet, according to reports, customs officials took no action against Reliance.

During its investigations, Samsung found out that Reliance had been warned as far back as 2017 by the authorities about the classification issue. But this red flag was never communicated to Samsung. The company now contends that the years of inaction by regulators effectively endorsed its classification method. So, Samsung believes, the current penalty lacks legal and procedural fairness.

Global Firms Push Back

Samsung's case follows closely behind another high-profile tax dispute. The German car manufacturer Volkswagen recently contested a record-setting INR 11,600 crore ($1.4 billion) claim made by Indian tax authorities. At issue in both disputes are similar allegations of misclassified imports. These two prominent challenges by multinational corporations may signal bad publicity. They could be seen as indications of rising discontent among foreign investors over the certainty and consistency of India's tax and regulatory regime.

Samsung’s 281-page appeal defends the legality of its classification and criticizes the process followed by the authorities. The company contends that the January 2025 tax order was issued hastily and without adequate opportunity to respond, despite the financial and operational stakes involved.

Apart from the INR 4,300 crore tax demand, Indian authorities have also slapped an INR 670 crore ($81 million) penalty on seven Samsung employees. This means the total liability is now at INR 5,000 crore ($601 million). As of now, there is no public indication that the individuals penalized intend to mount a challenge to the ruling on their own. The India arm of Samsung clocked a net profit of around INR 7,800 crore ($955 million) in the last fiscal. Therefore, the demand for current taxes represents a big financial risk, one that could color the company's investment plans and its operational strategies in one of its most crucial markets.