Samsung hit with $601 million tax bomb in India over import tariff evasion

aid India has ordered the South Korean tech giant Samsung to pay $601 million (₹5,152 crore) in back taxes and penalties for evading import tariffs on telecom equipment, according to a report by Reuters. This comes amid India's stricter oversight of foreign companies and their imports.

In February, Volkswagen sued the Indian government over a $1.4 billion tax demand issued in September 2023, accusing the automaker of evading duties by importing vehicles as separate parts.

Samsung will have to pay $520 million (₹4,460 crore) in back taxes, along with a 100% penalty. Additionally, seven senior executives, including Network Division VP Sung Beam Hong, CFO Dong Won Chu, finance GM Sheetal Jain, and indirect tax GM Nikhil Aggarwal, face fines totalling $81 million, according to the tax order.

The tax demand pertains to its $955 million net profit last year. The smartphone major is expected to challenge the order in court or a tax tribunal.

India's tax authorities launched an investigation into Samsung in 2021, searching its Mumbai and Gurugram offices and seizing documents, emails, and electronic devices. The dispute centres on the company's duty-free imports of Remote Radio Head (RRH) components—critical to 4G telecom systems—worth $784 million from Korea and Vietnam between 2018 and 2021. Officials argued that these components, which transmit signals from telecom towers, were subject to import tariffs. Samsung, however, maintained they were not transceivers and backed its classification with expert opinions.

In 2023, the company received a warning for allegedly misclassifying telecom equipment to evade 10-20% tariffs on a key transmission component. Samsung imported and sold these parts to Reliance Jio, claiming that customs officials had long been aware of its classification. However, a confidential January 8 customs order, reviewed by Reuters, rejected this defence.

In the order that Reuters reviewed, customs commissioner Sonal Bajaj said that Samsung deliberately submitted false documents for customs clearance and that the company violated Indian laws and disregarded business ethics to maximise profits by defrauding the government. In response, Samsung asserted that the issue was a matter of classification interpretation, insisting on its compliance with Indian laws while evaluating legal options to protect its rights.