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Samsung faces potential loss of tax benefits in India due to invoicing discrepancies

Soumyakanti — Mon, 05 Jun 2023 13:21:09 +0000

Samsung, the leading smartphone brand in India, is at risk of losing tax benefits for the financial year 2021. Under the Indian government’s Production-Linked Incentive (PLI) scheme, smartphone manufacturers can receive tax benefits by producing devices locally and investing capital in the country.

Rectifying Invoicing Problems: Samsung is Working to Resolve the Issue

According to a report by The Economic Times, Samsung may have to forgo tax benefits for the initial year of the PLI scheme due to discrepancies in its invoicing process. The South Korean company has acknowledged the issue and is currently engaged in advanced discussions with the Indian government to resolve the matter. In its claim for incentives, Samsung reported a total of INR 9 billion (approximately $108 million) based on achieving INR 150 billion (around $1.81 billion) worth of additional sales in FY21 compared to the previous year.

To qualify for these incentives, Samsung needed to manufacture phones with a factory cost of approximately INR 15,000 ($200). However, the Ministry of Electronics and Information Technology (MeitY) discovered inconsistencies in Samsung’s invoices, resulting in the temporary withholding of payment by officials.

A government official familiar with the situation has confirmed that Samsung has rectified the invoicing issue, ensuring the accuracy of its invoices. However, the official indicated that the tax benefits for the first year may be irretrievable, implying that Samsung may not receive the eligible incentives. Nevertheless, the company remains eligible for tax benefits for the financial year 2022. In contrast, other manufacturers such as Foxconn and Wistron have already received their tax incentives from the Indian government.

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Oppo Mobiles India’s finance manager arrested for tax fraud of Rs 19 crore

Soumyakanti — Thu, 23 Mar 2023 21:12:24 +0000

The Finance and Accounts Manager of Oppo Mobiles India Private Limited, Mahendra Kumar Rawat, has been arrested by the Central Goods and Services Tax (CGST) Commissionerate for allegedly availing of input tax credit (ITC) worth Rs 19 crore through fake invoices. Rawat was later produced in a local court in Bhiwandi town and remanded in judicial custody until April 3.

According to the CGST Bhiwandi Commissionerate’s statement, Rawat was arrested under section 69 of the CGST Act, 2017, for contravening section 132 of the same Act. The investigation conducted by the anti-evasion wing of the CGST Bhiwandi Commissionerate found that Oppo Maharashtra was involved in fraudulently availing of fake ITC without receipt of any goods.

The investigation further revealed that the supplier of Oppo Mobiles India Pvt Ltd, M/S Gain Hero India Private Limited, was non-existent at its principal place of business. Additionally, 16 e-way bills for the said transaction were verified and found to be fake. Statements of the transporters and vehicle owner were recorded, revealing that there was no supply of goods to Oppo Maharashtra.

Rawat, as the authorized signatory and Manager of Finance and Accounts of Oppo Mobiles India Private Limited, played a key role in availing of fraudulent ITC amounting to Rs 19,27,54,093 against invoices amounting to Rs 107,08,56,072 issued by Gain Hero India Private Limited, without receipt of the goods. The accused admitted in his statement that the e-way bills generated were fake, according to the CGST Commissionerate.

The case is part of the special drive launched by the CGST Mumbai Zone against tax fraudsters and tax evaders. The CGST Bhiwandi Commissionerate has arrested 24 persons in the last 18 months.

This incident raises concerns about the credibility of the business practices of Chinese smartphone makers in India. As smartphone penetration in India continues to grow, it is essential for companies to maintain transparency and integrity in their financial transactions. Failure to do so could result in significant penalties, which could adversely affect their reputation and market position. This case serves as a warning to other companies to adhere to the law and avoid fraudulent practices.

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India proposes 30% tax on virtual assets like crypto & NFT

Sean — Tue, 01 Feb 2022 14:33:59 +0000

Earlier this week, India had announced its plans for a digital currency that will launch next year. It even proposed taxing virtual assets like cryptocurrency and NFT, as it prepares to recognize digital currencies as a legal tender.

According to finance minister Nirmala Sitharaman (Via TechCrunch), the Indian government is proposing a 30 percent tax on income from the transfer of virtual assets. She further added that 1 percent tax should be deducted at source on payments made to purchase digital assets. Sitharaman said that “No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of digital asset cannot be set off against any other income. Gift of virtual digital asset is also proposed to be taxed at the hand of the recipient.”

The news arrives as the nation paves the way for cryptocurrencies and NFTs, although, government regulations on these assets are still uncertain. Notably, India’s central bank is planning on a new digital currency that is set to be released sometime next year. Its already began testing, which will go on for several months as the nation analyses its impact on the banking and monetary systems. Apart from just offering some clarity over taxing on digital assets, this news also showcases a rather progressive outlook from the Indian government since it is legalizing cryptoassets.

Samsung’s Lee family to pay more than $10.8 billion inheritance tax

Jeet — Wed, 28 Apr 2021 05:17:06 +0000

The family of Lee Kun-hee, Chairman of Samsung Electronics, revealed that they will pay more than 12 trillion won (approximately $10.8 billion) in inheritance taxes for the estate and donate the vast private art collection to state curators.

According to the report from Reuters, the tax won’t be paid in a single instance. The family said that they are planning to pay the tax bill over a period of five years in a total of six installments, starting this month.

Lee Kun-hee, former Samsung Chairman

The family has also announced that it will donate 1 trillion won to improve public healthcare in the country, including 500 billion won to build South Korea’s first specialist hospital for infectious diseases.

For those who are unaware, Lee died on 25th October, leaving an estate valued at around 26 trillion won. He is credited with transforming Samsung into one of the world’s largest companies and a leader in smartphones as well as the memory chip market.

Everyone’s eyes were on the handling of the inheritance tax bill by the Lee family which is the largest-ever in Korea and globally. There’s a possibility of dilution of the family’s controlling stake in Samsung depending on how it is handled.

People were calling for Lee’s $1.76 billion art collection to stay in South Korea as reports suggested that the family planned to make a large donation to make reparations for Lee’s conviction on tax evasion and embezzlement charges over a decade ago.

Interestingly, the family has revealed how the stake in Samsung is divided. Now, investors will need to wait for regulatory filings to discover changes in shareholdings by Lee’s son and Samsung Electronics vice chairman Jay Y. Lee or other family members.

Last week, it was reported that the family had been discussing using shares in affiliated companies as collateral for personal loans to pay part of the tax bill to avoid the sale of their Samsung holdings.