NEW DELHI: India's tax authorities have mandated Samsung and its executives to pay $601 million in back taxes and penalties for allegedly evading tariffs on the import of key telecommunications equipment. This marks one of the largest tax demands in recent years, reflecting a significant portion of the company's net profit of $955 million reported last year in India, where Samsung is a major player in the consumer electronics and smartphone market. This ruling can be contested in a tax tribunal or the courts, as reported by Channel News Asia.

The demand arises from allegations that Samsung misclassified imports to avoid paying tariffs ranging from 10% to 20% on a crucial transmission component vital for mobile towers. Samsung's network division has been warned multiple times, most recently in 2023, regarding its classification practices. Following a thorough review by customs officials, it was determined that Samsung "violated" Indian laws and "knowingly and intentionally presented false documents" to the customs authority for clearance, according to Sonal Bajaj, a customs commissioner. The order detailed that Samsung owes 44.6 billion rupees ($520 million), which includes unpaid taxes and a 100% penalty.

In addition to the company, seven local executives are facing fines totaling around $81 million. This group includes prominent figures such as Sung Beam Hong, the network division's vice president, CFO Dong Won Chu, and finance general manager Sheetal Jain, as detailed in an order that was reviewed by Reuters.

Despite the tax authority's ruling, Samsung disputes these claims, arguing that the component did not incur tariffs and that the customs department has been aware of its classification practices for years. The investigation into Samsung's imports initiated in 2021 involved inspections that resulted in the seizure of various documents and devices from its offices across India. Tax officials pointed to evidence, including previous communications from Samsung, which classified the component as a transceiver—a designation that necessitates tariffs.

The scrutiny of Samsung coincides with India's increasing vigilance over foreign companies and their import practices. Other global companies, including Volkswagen, have also faced hefty tax demands, raising concerns among investors regarding India's tax policies.

Samsung stated, "The issue involves the interpretation of classification of goods by customs," affirming its compliance with Indian laws. The company is currently assessing legal options to protect its rights in light of this order.