Samsung Faces $601 Million Penalty for Allegedly Evading Duties

India’s tax authorities have launched a massive crackdown on Samsung, slapping the company with a $601 million tax demand for allegedly misclassifying telecom equipment imports to evade duties. The investigation, which began in 2021, has exposed serious violations by the South Korean tech giant, raising concerns about corporate ethics and tax compliance in India.

Samsung, which made $955 million in net profit from its Indian operations last year, has been accused of deliberately misclassifying a key telecom component—the Remote Radio Head (RRH)—to dodge a 10-20% tariff. The component, a crucial part of 4G telecom networks, was imported from Korea and Vietnam between 2018 and 2021, with no duties paid on imports worth $784 million. Samsung then sold these components to Mukesh Ambani’s Reliance Jio, fueling further scrutiny.

A Deep Investigation Unmasks Samsung’s Practices

The Indian customs department raided Samsung’s offices in Mumbai and Gurugram, seizing emails, documents, and electronic devices as part of their probe. Top executives were questioned, and after thorough investigations, authorities concluded that Samsung knowingly violated Indian laws and submitted false documents to evade taxes.

According to Customs Commissioner Sonal Bajaj, the company “transgressed all business ethics and industry standards”, prioritizing profit over compliance and defrauding the Indian government. Samsung’s attempts to dismiss the scrutiny failed, as officials cited company documents from 2020 where Samsung itself described RRH as a transceiver, contradicting its claim that it was duty-free.

Massive Penalties on Samsung and Its Executives

Following the investigation, authorities ordered Samsung to pay ₹44.6 billion ($520 million) in unpaid taxes and penalties. In addition, seven senior executives were held personally accountable, facing a collective fine of $81 million. Those penalized include Vice President Sung Beam Hong, CFO Dong Won Chu, finance head Sheetal Jain, and indirect tax manager Nikhil Aggarwal.

Despite the damning evidence, Samsung denies any wrongdoing, stating: “The issue involves the interpretation of classification of goods by customs. We have always complied with Indian laws and are assessing legal options to protect our rights.”

India Tightens Tax Scrutiny on Foreign Companies

This development comes at a time when India is ramping up oversight of foreign firms, ensuring they follow the country’s tax and regulatory framework. Volkswagen is already battling a $1.4 billion tax demand over similar misclassification issues.

Samsung’s case raises serious questions about corporate transparency and tax ethics. While the company insists it has not violated Indian laws, the findings suggest a calculated attempt to bypass India’s tax system.

Source: The Economic Times