LG Electronics India Faces Tax Draft Order, Plans Legal Challenge

LG Electronics India Limited has officially announced receiving a Draft Assessment Order from the Income Tax Authority for the Financial Year 2022-23. This order proposes tax disallowances amounting to ₹5,728 Million (approximately ₹572.8 Crore).

A significant portion of these proposed disallowances, specifically ₹2,168.90 Million (approximately ₹216.9 Crore), is related to transfer pricing issues. The company has stated its intention to formally contest these proposals by submitting objections to the Dispute Resolution Panel.

LG Electronics India emphasized that this draft order is not expected to have any immediate financial or operational impact on the company.

Why This Matters

This development highlights the ongoing tax scrutiny LG Electronics India faces, even as it works to resolve past issues. Draft tax orders proposing substantial disallowances can signal potential future liabilities for companies if the authorities' positions are upheld through the appeals process.

The company's proactive stance in contesting the order and its expectation of no immediate financial impact are key aspects for stakeholders to monitor.

The Backstory

LG Electronics India has a history of engaging with Indian tax authorities on complex matters, particularly concerning transfer pricing. In a significant move, the company finalized an Advance Pricing Agreement (APA) with the Central Board of Direct Taxes (CBDT) in January 2026.

This APA, covering the period from April 1, 2014, to March 31, 2023, aimed to resolve long-standing disputes related to transfer pricing adjustments, including those involving marketing intangibles and royalty payments to its Korean parent company. The agreement effectively eliminated contingent liabilities related to direct taxes (₹1,724.38 Million) and royalty payments (₹3,153.00 Million) for the period.

Despite this APA, reports from late 2025 indicated that other tax disputes, including income tax, excise, and service tax claims aggregating ₹4,717 Crore, were still active. Separately, in January 2026, the company also received a customs demand of ₹27.40 Crore for digital signage imports, which it plans to appeal.

Next Steps

LG Electronics India is now focused on preparing and filing detailed objections with the Dispute Resolution Panel. This marks the formal initiation of the legal and appellate process to challenge the Income Tax Authority's current proposals for FY2022-23.

Risks to Watch

The primary risk for LG Electronics India lies in the potential confirmation of these disallowances by the Dispute Resolution Panel or higher judicial authorities, which could result in significant tax liabilities.

While the company expects no immediate impact, prolonged litigation can introduce uncertainty and divert management attention. The current order also adds to the landscape of ongoing tax scrutiny for the company.

What to Track Next

Investors and stakeholders will be tracking LG Electronics India's progress in filing objections with the Dispute Resolution Panel and the timeline for any response or ruling.

Further updates on the appeal against the customs duty demand for digital signage and any new developments concerning the ongoing tax litigations will also be important indicators.