India's customs authorities are investigating Samsung Electronics and LG Electronics on suspicion of underreporting duties on display components used in premium televisions. If the allegations are confirmed, the companies could face penalties of up to 100% of the unpaid duties, on top of the duties themselves.
Reuters reported on the 23rd, citing five sources, that India's Directorate of Revenue Intelligence is examining whether the two companies underdeclared duties on imports of "open cell" display components used to make organic light-emitting diode panels in India.
India applies a preferential 5% duty on parts related to older liquid crystal display and light-emitting diode products. Authorities take the position that the OLED components the two companies imported do not qualify for the preferential rate and should instead be taxed at 15%. DRI investigators visited Samsung Electronics' Indian headquarters in New Delhi in recent weeks and questioned executives and staff, while LG was examined through a written questionnaire, according to the report. One source said LG Electronics voluntarily posted a deposit to cover the duties sought by the authorities.
The total amount of duties the two companies are suspected of having avoided has not been disclosed. If the evasion allegations are upheld, authorities can impose a penalty of up to 100% of the unpaid duties, Reuters added. Samsung Electronics told Reuters that it is cooperating fully with the authorities and reviewing the matter, and that it is committed to complying with all laws. LG Electronics and the DRI did not respond to Reuters' requests for comment.
Samsung and LG are said to argue that OLED is built on LED technology and should therefore be subject to the same duty rate. India's Consumer Electronics and Appliances Manufacturers Association and the Manufacturers' Association for Information Technology sent letters making a similar case to India's information technology ministry in August. They said OLED television makers are facing higher input costs and weakening competitiveness because they cannot access the preferential duty, and that this runs counter to the Make in India policy.
LG Electronics listed its Indian unit on the Bombay Stock Exchange last year, and its market capitalization now stands at about $12 billion. LG said in August that its share of India's television market was about 26% by value, with an OLED share of about 59%. Samsung also sells a wide range of OLED products in India. Separately from these allegations, Samsung Electronics was assessed $520 million in taxes by Indian authorities last year over alleged misclassification of imported network equipment, and is contesting the case in legal proceedings.
