The Hindu : Business : Imported liquor to cost less

Online edition of India's National Newspaper
Thursday, Jul 05, 2007
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Business

Imported liquor to cost less

Special Correspondent

U.S. welcomes steps taken by India

The prices will be cheaper by 33 p.c.

Complying with
WTO rules

NEW DELHI: Even as the scrapping of the additional customs duty on foreign liquor, wine and beer by India is under the lens of the U.S. and the European Union and is still not apparent if the step is to their complete satisfaction, one thing is clear — that imported spirits are likely to cost the Indian consumer much less.

With the Central Board of Excise and Customs (CBEC) notification in place, the low-end brands of Scotch whisky and other imported wines and spirits are likely to be cheaper by about 33 per cent, while the premium labels such as ‘Johnnie Walker’ and ‘Chivas Regal’ are expected to cost about Rs. 350-500 less a bottle than before.

According to industry sources, the prices of imported liquor, on an average, would come down by about a third of the current price tag once the notification comes under implementation.

This, however, would hold true for those products whose c.i.f. (cost, insurance, and freight) happens to be in the range of $ 40 or about Rs. 1,600 a case, the segment that accounts for the maximum imports.

Following the European Union and the U.S. dragging India to the World Trade Organization (WTO) on the charge that it was flouting its trade rules and imposing more taxes than permissible, the CBEC announced on Tuesday the removal of additional customs duty up to 150 per cent on imported liquor.

Commenting on the duty reduction, the U.S. on Wednesday gave a guarded welcome to the steps taken by India to help address its concerns on high customs duty on wine and spirits. “We cannot comment on pending cases but we would welcome steps by India to help address U.S. concerns in this area,” the U.S. spokesperson said.

Under the existing duty structure, nearly $ 40 per case (12 bottles) of wine is imposed by way of additional customs duty over and above the basic duty of 100 per cent. In effect, for the $ 40 c.i.f. value, the total incidence of tax works out to $80.

Under the new dispensation, while the basic duty on wine has been hiked to 150 per cent, the additional burden of $40 a case has been removed. Thus, the net impact would be a saving of $20 a case.

Hitherto, the additional customs duty imposed by India ranged between 20 and 150 per cent, which was over and above the basic customs duty of 150 per cent allowed by the WTO. Now, while scrapping the additional customs duty, the Government, however, has increased the basic customs duty on wines to 150 per cent from 100 per cent. Under WTO regulations, India is permitted to impose 150 per cent customs duty on imported wines and spirits.

On beer also, the basic customs duty is 100 per cent while the additional customs duty was 75 per cent. While the EU had complained against India on wines and spirits, the U.S. had also sought removal of additional customs duty imposed by India on beer.

After the failure of consultations, both the EU and the U.S. pressed for formation of the Dispute Settlement Panel of the WTO and the demand was accepted.

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