India scraps extra duty on imported liquor

5 July, 2007: In a development that is sure to cheer consumers of imported alcohol, the Government of India has abolished additional customs duties on imported
liquor, including wine and beer.

The Central Board of Excise and Customs, which notified the duty cut, however, allowed state governments to impose additional levies equivalent to taxes on domestic manufacturers.

The Indian government’s decision is in keeping with the commitments India has made to the World Trade Organization (WTO).

The United States and the European Union had complained to the WTO earlier in 2007 that the additional duties levied by India on imported spirits militated against India’s commitments to the international trade body.

With a view to protecting domestic manufacturers, India had imposed additional duties ranging from 150% to 550% on imported wines and spirits after easing import regulations for the same in 2001.

The World Trade Organization's rules allow imposition of duties up to a maximum of 150%.

The Indian government had increased basic customs duty on wines from 100% to 150%, while all other foreign liquor would also attract a maximum customs duty of 150%.

The taxes on these commodities would now be equivalent to the levies imposed on domestic wine and spirits, and this would reduce the prices of imported liquor in the Indian retail market.

The World Trade Organization had set up a disputes settlement body to look into the complaints by the United States and the European Union.

Importers of wine and spirit have welcomed the Indian government’s decision, saying that they have been asking for it for many years.

The influential Scotch Whisky Association (SWA) said it was “good news” for Indian consumers.

The Scotch Whisky Association said that it has been campaigning for the last six years at various levels with the British government and the Indian government as well as the European Union, the United States and the WTO to reduce India’s high import duties.

The duties were seen as a major obstacle by Scotch whisky exporters, who were keen to enter the vast Indian market for spirits and wines. It was when the prolonged negotiations with the Indian government failed that the industry groups approached the World Trade Organization to resolve the dispute.

According to SWA figures, sales of scotch whisky reached record levels in 2006, when exports rose by 4% to 2.5 billion pounds – surpassing the previous high of 2.4 billion pounds in 1997. The volume of shipments also rose by 6% in 2006 to over one billion bottles.

The demand for imported spirits is high in India as the country’s booming economy has ensured high disposable income.