Samsung Challenges $520 Million Tax Claim in India, Cites Reliance Precedent

Source: Gadgets 360

Samsung Electronics has approached an Indian tribunal to overturn a hefty tax demand of approximately $520 million (around Rs. 4,381 crore), claiming that the import classifications in question had long been known to tax officials and mirrored practices previously used by India's Reliance Industries, according to legal documents.

This makes Samsung the second global company in recent times to contest a significant tax assessment from Indian authorities. Recently, German auto giant Volkswagen initiated legal proceedings against the Indian government over a $1.4 billion (Rs. 11,797 crore) tax bill tied to a similar dispute around import classification.

The current dispute centers on Samsung’s import of a telecom component called "Remote Radio Head," which the company supplied to Reliance Jio between 2018 and 2021. Authorities allege Samsung deliberately misclassified the component to evade duties ranging from 10% to 20%. In January, Indian officials issued the $520 million tax demand, also fining seven Samsung employees a collective $81 million (about Rs. 682 crore), pushing the total demand to $601 million (around Rs. 5,066 crore).

In its 281-page submission to the Customs Excise and Service Tax Appellate Tribunal in Mumbai, Samsung argues that tax officials had prior knowledge of the classification practice, particularly since Reliance had used the same import strategy without penalty until 2017. The company contends that Reliance had been alerted by tax officials at that time, but failed to share the information with Samsung.

Samsung asserts in its filing, dated April 17, that authorities never raised objections during the relevant period and criticizes the January tax order as rushed and procedurally unfair. The company insists it was denied a meaningful opportunity to defend its position, despite the scale of the financial implications.

The documents also highlight that Samsung only became aware of Reliance’s 2017 warning during a later tax probe. "The classification adopted by the appellant was known to the authorities," the filing states, emphasizing that the government was “fully aware” of the classification method used.

Neither Samsung nor India's tax department have issued public responses to media inquiries. Details about the 2017 warning to Reliance remain undisclosed, and Reliance has not responded to questions regarding the matter.

The tax assessment poses a serious financial challenge for Samsung, equaling a significant portion of its 2023 net profit in India, which stood at $955 million (roughly Rs. 8,050 crore). Samsung remains one of the top consumer electronics and smartphone brands in the country.

According to the tax department’s January order, Samsung imported around $784 million (approximately Rs. 6,609 crore) worth of the disputed telecom equipment from South Korea and Vietnam. Authorities accuse the company of prioritizing profits over compliance, claiming it sidestepped industry norms and defrauded the Indian treasury.