The Indian government has imposed a back tax and penalty of $601 million (about Rs 5,154 crore) on Samsung and its officials. This action has been taken due to alleged manipulation to save duty on the import of telecom equipment. This case is considered to be one of the biggest tax demands imposed on any company in recent years. Samsung received this huge tax and penalty when the company earned a net profit of $955 million (about Rs 8,183 crore) in India last year. However, Samsung can challenge this decision in the tax tribunal or court. The Samsung faces record fine in India over tax evasion allegations post CEO death.
Samsung’s network division imports telecom equipment, including an important device, the “remote radio head.” It is an essential component for mobile towers, which play an important role in the 4G communication system.
The government says that a tariff of 10% to 20% is applicable on this equipment, but Samsung misclassified it so that it could avoid import duty. Between 2018 and 2021, the company imported this equipment worth $784 million (about ₹ 6,717 crores) from South Korea and Vietnam but did not pay any tax on it.
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According to the government investigation, Samsung deliberately submitted false documents so that it could avoid customs duty. According to Customs Commissioner Sonal Bajaj, the company “violated business ethics and industry standards” and deceived the government with the sole aim of increasing profits.
The investigation into this matter started in 2021, when Indian tax officials raided Samsung’s offices in Mumbai and Gurugram. During this, many documents, emails, and electronic devices were seized. After this, senior officials of the company were also questioned.
Samsung has argued on this entire matter that this device does not transmit signals, so no import duty should be imposed on it. Samsung also presented the opinion of four experts in its favor, but in a 2020 government letter, Samsung itself described this device as a transceiver, which the government presented as evidence and declared Samsung wrong. The government has fixed a tax liability of Rs 5,154 crore on Samsung, out of which Rs 4,460 crore (520 million dollars) is the previous tax and the rest is a penalty.
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