Mumbai: Raising concerns over unfair taxes on imported spirits, an international liquor lobby group has again threatened to drag India to the World Trade Organization, or WTO, to secure market access in line with global trade rules.
The Scotch Whisky Association, or SWA, which represents spirit makers with distilleries in Scotland, met commerce ministry officials several times on the special fees and duties levied on imported spirits in some Indian states. It has now written to the European Union, or EU, to resolve the issue through discussions.
Booze brawl: A liquor shop selling Indian and foreign-made brands in New Delhi. The Scotch Whisky Association has renewed its threat to take India to WTO over ‘unfair’ taxes on imported spirits.
“The industry has highlighted these concerns to the EU and we hope they might be resolved through ongoing bilateral discussions,” said David Williamson, a spokesperson for SWA.
“That said, if necessary, the industry has made it clear on a number of occasions that it will not hesitate to argue for a return to the WTO in the future...,” he said in an email response to Mint on Wednesday.
A number of Indian states maintained or modified their tax regimes to ensure equal treatment for imported and domestic products after the Union government reformed customs duty in July 2007.
“There are, however, continuing issues in states such as Maharashtra where there is a special fee on imported spirits, involving either a flat rate of Rs300 per bulk litre or an ad valorem rate that varies between 75% and 200%, depending on the value of the product, with the higher rate being levied,” Williamson said.
India’s commerce secretary G.K. Pillai confirmed that the department has received complaints on the issue.
“We have asked the Maharashtra government whether it can reform the special duties levied exclusively on the imported spirits to bring it on par with domestic brands. A response from the state is awaited now.”
“The association and local industry representatives continue to assess the implications of the system and its compatibility with WTO rules,” the SWA spokesperson said. “There are significant concerns that the system is operating in a discriminatory manner and we believe early steps should be taken to ensure that imported and domestic spirit drinks are taxed on a fair and equal basis in Maharashtra.”
S.S. Kudale, joint commissioner at Maharashtra’s department of excise, said his department “sent a detailed report to the Central government on Thursday explaining that the duties on local and imported spirit brands are almost equal and they have been levied for long in the state as excise duty and special duty on local and imported spirits, respectively.” He declined to provide details on the state’s stand on reforming the levies.
This is the second instance the European liquor lobby group has pressured India to comply with WTO rules, the first being on removing central import duty in early 2007.
Last year, the SWA, along with the European Commission, asked the government to reduce customs duties on imported liquor in line with WTO rules to enable its members to price their products competitively in the market.
Following this, the government in July completely removed additional customs duty on imported spirits, and reduced import duty on liquor to 150% from the earlier range of 250% to 550%. Following this, Maharashtra introduced an additional special duty on imported spirits.
Meanwhile, following intense lobbying from spirit importers, the Delhi government has deferred its proposal to introduce an additional 30% tax on bottles of foreign imported liquor.
The discriminatory tax structure has seriously hurt the price competitiveness of imported whiskies in India’s largest regional whisky markets, said Asif Adil, managing director of Diageo India, the Indian arm of the world’s largest liquor company Diageo Plc., in an 2 April interview.
Earlier this month, two of India’s other important liquor selling states—Goa and Karnataka — also hiked taxes, but these increases apply to both imported and domestic brands.
Goa doubled the import fee for spirits from Rs100 per bulk litre to Rs200 for bottles priced up to Rs1,500, and to Rs300 for more expensive bottles.