Could you imagine being targeted out years after spending hundreds of millions of dollars to conduct business as everyone else did? This is something that Samsung is currently enmeshed in that storm.

By mislabeling telecom components, particularly a device known as a “Remote Radio Head,” which is essential to 4G infrastructure, the corporation is allegedly underpaying import charges in India.

Samsung supplied these to Reliance Jio, a significant local participant, between 2018 and 2021. In addition to an eye-opening $81 million charge on individual employees, the Indian government now alleges Samsung owes an astounding $520 million in unpaid tariffs.

The most annoying part? Samsung claims that up until 2017, Reliance employed the same categorization scheme. No fines. Not a drama.

So, the question is: Is this selective enforcement or a fair shake?

Because this is a trust issue, not just a tax one, if the rules changed in the middle of the game and nobody received the message, that’s a message that goes much beyond Samsung. Let’s break down the Samsung case to understand better.

What is Samsung’s Tax Demand?

Samsung has requested that an Indian tribunal drop a $520 million tax claim for allegedly mistakenly identifying networking equipment imports. According to records, officials knew about the practice because India’s Reliance had been similarly importing identical equipment for years.

In recent months, Samsung has become the second significant international corporation to contest an Indian tax claim.

Volkswagen has filed a record-breaking $1.4 billion lawsuit against the government of Prime Minister Narendra Modi for misclassifying its imports of parts.

What’s Samsung’s Defense?

Samsung accuses Indian authorities of being “fully aware” of the business model in its 281-page challenge to the Customs Excise and Service Tax Appellate Tribunal in Mumbai, citing Reliance’s “long-established practice” of importing the same equipment for three years until 2017 without paying any tariffs.

Reliance was told about the practice back in 2017. Still, Reliance failed to notify the South Korean company, and tax authorities never questioned Samsung, according to Samsung’s India unit, which was found out during an Indian tax inquiry. 

Volkswagen recently filed a lawsuit against India over an astounding tax demand of $1.4 billion.

This case has a significant impact on Samsung, which made $955 million in India last year.

Additionally, the business asserts that the decision was made quickly and without a fair hearing.

The January order stated that Samsung

“transgressed all business ethics and industry practices or standards in order to achieve their sole motive of maximizing their profit by defrauding the government exchequer,”

According to the findings of the investigators.

In my opinion, India may need to reconsider how it applies retroactive taxes if Samsung prevails. More international audits are likely to follow if it loses.