Samsung fights $520 million India tax demand, factors to Reliance observe

Samsung turns into the second main overseas firm in latest months to problem an Indian tax demand [File]
| Photograph Credit score: REUTERS

Samsung has requested an Indian tribunal to quash a $520 million tax demand for allegedly misclassifying imports of networking gear, arguing officers had been conscious of the observe as India’s Reliance imported the identical part in an analogous method for years, paperwork present.

Samsung turns into the second main overseas firm in latest months to problem an Indian tax demand.

Volkswagen has sued Prime Minister Narendra Modi’s authorities in courtroom for a file demand of $1.4 billion for misclassifying its part imports.

Within the Samsung case, tax authorities in January requested Samsung to pay $520 million for evading the 10-20% tariffs by misclassifying imports of a key cell tower gear, which it then bought to billionaire Mukesh Ambani’s telecom large, Reliance Jio, from 2018 to 2021.

In its 281-page problem on the Customs Excise and Service Tax Appellate Tribunal in Mumbai, Samsung criticises Indian authorities for being “totally conscious” of the enterprise mannequin as Reliance had a “long-established observe” of importing the identical gear with none tariff funds for 3 years till 2017.

Samsung’s India unit says it found throughout an Indian tax investigation that Reliance had been warned concerning the observe approach again in 2017, however Reliance didn’t inform the South Korean firm about it and tax officers by no means questioned Samsung.

“The classification adopted by the appellant (Samsung) was recognized to the authorities, nevertheless the identical was by no means questioned … Division was totally conscious,” Samsung says in its April 17 submitting, which isn’t public however was seen by Reuters.

“Reliance Jio officers didn’t inform” Samsung concerning the tax warning of 2017, it provides.

Samsung and India’s tax authority didn’t reply to Reuters queries.

Additional particulars of Reliance’s 2017 warning from tax authorities will not be public and weren’t disclosed within the Samsung submitting. Reliance did not reply to Reuters queries.

Aside from $520 million demand Samsung faces, Indian authorities have additionally imposed an $81 million nice on seven of its staff, taking the entire tax demand to $601 million. It isn’t clear if Samsung staff are individually difficult the fines.

The tax demand represents a considerable chunk of final yr’s web revenue of $955 million for Samsung in India, the place it is without doubt one of the largest gamers within the shopper electronics and smartphones market.

In defending its tariff declarations, Samsung additionally argues in its submitting that the tax authority handed the order in January “in a rush” and it was not offered “a good alternative” to current its case, regardless of the “large stakes” concerned.

The Samsung case issues imports of a part known as “Distant Radio Head”, a radio-frequency circuit enclosed in a small outside module, that tax officers say is “some of the vital” elements of 4G telecoms programs.

The case in opposition to Samsung alleges it misclassified the part’s imports value $784 million from Korea and Vietnam between 2018 to 2021, to maximise earnings.

Investigators discovered that Samsung “transgressed all enterprise ethics and trade practices or requirements with the intention to obtain their sole motive of maximising their revenue by defrauding the federal government exchequer,” the January order said.