The Indian government has reportedly imposed a $601 million (~ ₹5,145 crore) tax demand on Samsung Electronics and its executives for allegedly evading tariffs on imported telecom equipment. According to a report by Reuters – citing a government order – this amount includes unpaid taxes and penalties. Mainly, the issue related to the importation of the ‘Remote Radio Head’ (RRH), a critical component (necessary for 4G LTE) used in telecom towers.
The concerned authorities allege that the South Korea-based electronics giant misclassified Remote Radio Head’s imports to avoid tariffs of 10-20%. In fact, customs officials have described these actions as fraudulent, claiming that Samsung intentionally submitted false documents to bypass duties.
The investigation into Samsung’s import practices began in 2021, involving searches of its offices in Mumbai and Gurugram, seizure of documents and electronic devices, and questioning of top executives. And, now investigations revealed that between 2018 and 2021, Samsung imported RRHs worth $784 million without paying the applicable duties.
Earlier, in August 2021, Samsung India deposited ₹300 crore (~ $40 million) with the Directorate of Revenue Intelligence (DRI) amid allegations of duty evasion related to RRH imports. Also in another case last year, the Korean giant accused the Competition Commission of India (CCI) of conducting an illegal raid, detaining its employees, and seizing confidential data during an antitrust investigation involving e-commerce giants Amazon and Flipkart. At that time, the company reportedly requested the Punjab & Haryana High Court to quash evidence seized from its employees.
Coming back to the recent development, the amount of this new tax demand becomes noteworthy considering it represents a significant portion of Samsung’s 2024 net profit of $955 million from its Indian operations. Notably, Samsung is a major player in the Indian consumer electronics and smartphone markets. And the outcome of this controversy could have major implications for Samsung’s operations in the country.
Talking about numbers, in the fiscal year 2024, Samsung India earned a total revenue of ₹1,02,626 crore (~ $12 billion), the highest in the past five years. In terms of product segments, revenue from hand-held phones (including mobile phones and accessories) was ₹71,157 crore. While, the home appliances segment experienced a slight decline of 3.93%, with revenue at ₹11,350 crore compared to ₹11,814 crore in the previous year.
Meanwhile, in response to the latest tax demand, Samsung has stated that the dispute involves the interpretation of the classification of goods by customs. The company claims that it has complied with Indian laws and is currently evaluating legal options to protect its interests.
The development is said to be a part of a broader pattern of increased scrutiny by Indian authorities on the import practices of foreign companies. For example, Volkswagen is also facing a $1.4 billion back tax demand over similar issues.
