Samsung has petitioned an Indian court to challenge a $520 million tax assessment related to the misclassification of imported networking equipment. The company asserts that officials are aware of the long-standing import practices, as similar elements have been imported by Indian firms for years.
This action makes Samsung the second prominent foreign entity to contest India’s tax requirements recently.
Volkswagen had previously filed a suit against Prime Minister Narendra Modi’s government for $1.4 billion, citing the misclassification of component imports.
In Samsung’s case, tax authorities demanded $520 million in January to avoid tariffs ranging from 10-20% on mobile tower equipment imports, claiming misclassification.
In a detailed 281-page appeal submitted to Mumbai’s Customs Tax and Services Tax Appeal Court, Samsung criticized Indian tax authorities for being “fully aware” of their operational model, noting that it had imported similar equipment duty-free for three years until 2017.
The company claims its Indian teams discovered during a tax audit that Reliance had received a warning from tax authorities in 2017, yet Reliance did not inform Samsung about this, and tax officials never raised concerns with Samsung.
“The classification used by Samsung was known to the authorities and was never questioned… they were fully aware,” Samsung stated in an April 17 filing which has not been publicly disclosed but was reviewed by Reuters.
Furthermore, Samsung mentioned that “Reliance Jio officials failed to notify them about the 2017 tax warning.”
Neither Samsung nor the Indian tax authorities have responded to inquiries from Reuters.
Details surrounding Reliance’s 2017 warning haven’t been disclosed, nor were they included in Samsung’s filings. Reliance also did not respond to questions from Reuters.
In addition to Samsung’s demand, India has imposed fines totaling $81 million on seven employees, bringing the total tax liability to $610 million. It’s unclear if Samsung’s staff are contesting these fines separately.
This tax demand represents a significant portion of Samsung India’s profits, which were reported at $955 million last year, making it a leading competitor in the appliance and smartphone sectors.
Samsung argues that the tax authorities acted “hastily” in issuing the January order and claims it was not given a “fair opportunity” to present its case despite the substantial stakes involved.
The dispute centers on the import of a component termed a “remote radio head,” a radio frequency circuit contained within outdoor modules, which tax officials describe as a crucial element of the 4G telecom infrastructure.
The lawsuit asserts that Samsung misclassified $784 million worth of components imported from South Korea and Vietnam between 2018 and 2021 in a bid to enhance profits.
Investigators allege that Samsung “disregarded all business ethics and industry norms” to achieve the singular objective of profit maximization, according to the January order.
