Samsung challenges India's $520 million tax demand, points at Reliance

Earlier this year, India ordered Samsung to pay $520 million in unpaid taxes over allegations that it misclassified imports of critical networking equipment from South Korea and Vietnam that was sold to local telecom giant Reliance Jio from 2018 to 2021.

Samsung has now challenged this significant tax demand by pointing at Reliance Jio, highlighting that it had also been importing the same component in a similar manner until 2017. It further claims that the decision was rushed by the tax authority and that the company was denied a fair hearing.

Samsung was asked to pay $520 million in taxes for alleged evasion of 10-20% tariffs on the importation of mobile tower equipment that was later sold to Reliance Jio from 2018 to 2021, back in January this year.

The company has now challenged this decision before the Customs Excise and Service Taax Appellate Tribunal in Mumbai. It highlights that the authorities were “fully aware” of this business model as Reliance had a “long-established practice” of importing the same equipment without any tariff payments for three years until 2017.

Samsung further added that while it discovered during the tax investigation that Reliance had been warned about this practice back in 2017, it never told Samsung about it and tax officials never questioned the Korean company as well.

In addition to the $520 million tax demand, the tax officials had also imposed an $81 million fine on seven Samsung employees, taking the total tax demand to $601 million, though it's unclear if those employees have separately challenged the fines.

It's difficult to predict at this point in time what the outcome of this challenge would be. Even the $520 million demand itself accounts for more than half of Samsung India's $955 million in net profit for last year, so evidently Samsung isn't going to let this slide easily.