(CTN News) – In accordance with a government decision, Samsung and its Indian officials have been instructed to reimburse $601 million in penalties and back taxes for evading tariffs on the import of critical telecommunications equipment.

This is one of the most significant requests of its kind in recent years. Samsung generated a net profit of $955 million in India last year. Demand was a significant contributor to that profit. Samsung is a significant player in the Indian consumer products and mobile phone markets.

On the other hand, it can be challenged in tax court.

In 2023, the organisation received a warning for misclassifying products in order to avoid paying a 10% or 20% tax on a critical gearbox component utilised in cell towers. The corporation imports communication equipment from other countries through its network section.

It was responsible for the importation of these products into the country and their subsequent sale to Reliance Jio, a telecommunications company that is owned by billionaire Mukesh Ambani.

Samsung stated that the component was not subject to tariffs and that the government had been aware of its classification system for years. Samsung requested that India’s tax authority cease the investigation, asserting that the component was unsuitable for examination.

Customs examiners, however, were not in agreement with the covert decision that was made on January 8. Reuters was able to review the decision, despite the fact that it had not been made public.

The decision stated that Samsung “knowingly and intentionally submitted false documents to the customs authority for clearance” and “violated” Indian laws.The following statement was given by Sonal Bajaj, a customs commissioner.

Bajaj stated that Samsung “violated all business ethics and industry standards in order to achieve their singular objective of maximising profit by defrauding the government treasury.”

The fine was 100%, which is approximately $520 million.

The decision stipulates that Samsung’s seven Indian executives will be subject to a total sanction of $81 million. The executives in question are Sung Beam Hong, who serves as the vice president of the network division;

Dong Won Chu, the chief financial officer; Sheetal Jain, the general manager of finance; and Nikhil Aggarwal, the GM of indirect taxation. People who occupy these roles are among those who will be penalised.

Samsung stated that the issue pertains to the manner in which customs interprets the labelling of products. The company also stated that it adheres to Indian laws. “We are presently conducting an assessment of a diverse array of legal alternatives to ensure that our rights are protected in every conceivable way.”

The Indian finance minister and customs authorities declined to respond to enquiries from Reuters. Reliance was not comparable. In the event that the event occurred, India was making it more difficult for foreign companies to conduct business and import products.

Volkswagen and New Delhi are currently litigating over the carmaker’s request for $1.4 billion in import back taxes. Volkswagen has claimed that the court case resulted in the incorrect labelling of automotive parts.

Despite the German company’s assertion that it did not violate any laws in what it refers to as a “matter of life and death” for its Indian operations, overseas investors are once again apprehensive about potential tax complications.

The utilisation of the term “remote radiohead”

In 2021, the tax police conducted inspections of Samsung’s offices in Mumbai, India’s financial capital, and Gurugram, a city located near New Delhi. Papers, emails, and certain electronic devices were confiscated during the examinations. This is the impetus for the Samsung investigation. Subsequently, enquiries were directed to senior management.

Tax officials assert that the “Remote Radio Head,” a radio-frequency circuit embedded in a compact outdoor module, is “one of the most critical” components of the 4G communications infrastructure. Samsung is encountering difficulties with tax officials due to their intention to import the “Remote Radio Head.”

Samsung was accused by Indian officials of neglecting to pay the $784 million it owed for the purchase of the part in Korea and Vietnam between 2018 and 2021.

The government asserts that the equipment on telecommunications towers is compensated for the transmission of messages. Conversely, Samsung is enquiring about the device’s functionality.

It stated in the tax decision that Samsung vigorously defended its classification, citing the opinions of four experts. Their argument was that the component was incapable of functioning as a transmitter, which allowed it to be imported duty-free.

Samsung received letters from the Indian government in 2020 informing them that the component was a transmitter. A transceiver is “a device that transmits” messages, according to the government.

Samsung “fully understood the appropriate classification of the contested goods,” as the tax commissioner stated.

SOURCE: PP