Samsung, the largest “Made in India” smartphone manufacturer in the country, is facing a hefty $601 million loss. The Indian government has ordered Samsung to pay more than half a billion USD in back taxes and penalties (via Reuters).
The reason? India claims that Samsung dodged tariffs on telecom equipment imports between 2018 and 2021, when the Korean tech giant sold those items to Reliance Jio.
In 2021, tax inspectors entered Samsung's offices in Mumbai and Gurugram. They seized emails, documents, and electronic devices.
According to Indian officials, Samsung failed to pay import tariffs worth $784 million for the “Remote Radio Head” component imported from Korea and Vietnam between 2018 and 2021. This year, Indian investigators claimed that Samsung:
Transgressed all business ethics and industry practices or standards in order to achieve their sole motive of maximizing their profit by defrauding the government exchequer.
India has now ordered Samsung to pay 44.6 billion rupees ($520 million) in unpaid taxes and a penalty of 100%. Meanwhile, seven executives in India are expected to pay $81 million in fines.
Samsung says it owes India nothing for these imports
Samsung states that “The issue involves the interpretation of classification of goods by customs” and has already complied with local laws.
We are assessing legal options to ensure our rights are fully protected.
Years ago, around the time the investigation on Samsung began, the Korean tech giant held the same view. The company defended its classification for the Remote Radio Head component, claiming that it did not perform the functions of a transceiver.
Therefore, Samsung claimed that it could import the Remote Radio Head component without any tax duty. Tax officials responded to these claims by citing letters Samsung sent to the Indian government in 2020, wherein it described the Remote Radio Head as a transceiver.
All in all, Samsung and the Indian government appear to disagree on how the Remote Radio Head component functions. Reliance, Samsung's client for the telecom equipment in question, did not respond.
