LG India Secures Tax Pact, Wipes Out ₹487 Crore Contingent Liability

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AuthorKavya Nair|Published at:
LG India Secures Tax Pact, Wipes Out ₹487 Crore Contingent Liability
Overview

LG Electronics India has finalized an Advance Pricing Agreement (APA) with the Central Board of Direct Taxes (CBDT), clearing contingent tax and royalty liabilities totaling ₹487.74 crore. The agreement, covering the period 2014-2023, results in a net tax expense of ₹17.71 crore and royalty payment of ₹3.86 crore. This comes as the company reported a 27.3% drop in Q2 profit to ₹389 crore, with revenue inching up 1%.

LG Electronics India announced on January 5, 2026, that it has successfully signed and concluded an Advance Pricing Agreement (APA) with the Central Board of Direct Taxes (CBDT).

APA Agreement Reached

The appliance maker had initially filed the APA application with Indian tax authorities on March 29, 2018. This agreement covers a retroactive period from April 1, 2014, through March 31, 2023.

Financial Impact of APA

The concluded APA will effectively render contingent liabilities related to direct taxes, originally pegged at ₹172.44 crore, to nil. Furthermore, a separate contingency amount of ₹315.30 crore linked to royalty payments to its promoter, LG Electronics Inc. of Korea, will also be eliminated.

The company stated that the APA will result in a net tax expense of ₹17.71 crore, excluding any applicable interest. Additionally, LG Electronics India will be obligated to pay a net amount of ₹3.86 crore to LG Electronics Inc. under secondary adjustment provisions, aligning with India's transfer pricing laws.

Second Quarter Performance

In its second-quarter results for the period ended September 2025, LG Electronics India reported a significant year-on-year decline in net profit. Net profit fell by 27.3% to ₹389 crore, down from ₹536 crore in the prior year.

Revenue from operations saw a modest increase of 1% year-on-year, reaching ₹6,174 crore compared to ₹6,113.8 crore, indicating stable consumer demand. However, the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) dropped 27.7% to ₹547.5 crore from ₹757.4 crore.

The EBITDA margin contracted to 8.9% for the quarter, down from 12.4% in the same period last year, reflecting pressures on operational profitability. Shares of LG Electronics India Ltd closed at ₹1,467.00 on the BSE, marking a decrease of ₹16.40 or 1.11%.

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