Nokia (NYSE:NOK) has been asked to settle up on a multi-billion rupee (equivalent to around $383 million) tax demand in India, but the company says it is going to continue to fight the claim and will not pay, for now.

Indian tax officials demanded that Nokia pay the 20.3 billion rupee fine, even though the New Dehli high courts have put a hold on the demand, Reuters is reporting. Were the order to be enforced, it would put Nokia in a difficult position, as the company has been facing declining sales and increasing pressure on its financial positions.

Recently, Nokia had to call off its annual issuance of dividends to help cover its cash levels, the first time in the company’s history. As of the of 2012, Nokia had cash reserves of $5.6 billion, down 22 percent from the year prior.

“Nokia reiterates its position is that it is in full compliance with local laws as well as the bilaterally negotiated tax treaty between the governments of India and Finland and will defend itself vigorously,” the company said in a statement. It is unclear as to how long the hold on the tax demand will be enforced.

India has been actively hounding foreign companies for tax obligations, in efforts to narrow its budget deficits to prevent a further credit downgrade. Last year, Mondelez International (NASDAQ:MDLZ) took heat on behalf of Cadbury plc, which Indian tax officials accused of misleading them about production from a new factory to avoid about $46 million in taxes.

India is a crucial market for Nokia, which will be facing far more intense competition as Apple’s (NASDAQ:AAPL) expansion plans begin to take effect there. Right now, India represents Nokia’s last dominant market globally. Samsung (SSNLF.PK) has been biting into the company’s market share as well, putting further pressure on the Finnish company.

Copyright Wall St. Cheat Street. All rights reserved.