New Delhi: Worried that it would be dragged to the World Trade Organization by the US and EU, India may remove additional duty on imported wines and spirits within the next two months by passing a necessary local legislation.
Lack of a state-level tax legislation for the imposition of the same tax levels on foreign as on Indian liquor and intense lobbying by domestic liquor makers made sure the additional customs duties remained even after the Budget.
“If the additional duty alone was removed, there would be a gap in duty collection since the states at present are not empowered to collect excise duty on imported wines and spirits,” a senior official, who did not wish to be identified, told Mint. “The cabinet note on the new law has been circulated by the finance ministry for comments and is expected to be taken up by the cabinet in the next two weeks. The legislation could have been part of the Budget, but is now expected to be a stand-alone legislation which will be introduced in the ongoing Budget session of Parliament.”
Another senior official said a foreign liquor lobby had petitioned Prime Minister Manmohan Singh to have the duties removed. The additional customs duty ranges from 25% to 150% on foreign liquor and 20% to 75% on wines. The total duty—import duty and additional customs duty—on imported wines and spirits ranges from 212% to 525%.
The US on 6 March said it intended to move the matter to a dispute panel at the WTO over the discriminatory duties imposed by India on imported wines and spirits. The EU has already is indicated it will do the same. The decision was conveyed by the EU agriculture commissioner Mariann Fischer Boel at a meeting with commerce and industry minister Kamal Nath.
After meeting Boel, Nath told reporters that the matter was being discussed at the highest level. “The issue has been raised very strongly by the (EU) agriculture commissioner not only now but also in the past. We are hopeful that they won’t have to go to the dispute settlement,” Nath said.
“With its fast-growing middle class, India could be an important export market for American wines and distilled spirits, if not for these layers of duties. We have raised this issue with the government of India on several occasions. We hope the matter can be successfully resolved in WTO consultations,” US trade represntataive Susan Schwab said, while announcing the filing of the case. Nath downplayed the Budget’s silence on removal of the duties, saying that, “This could have happened in the Budget, but it need not happen only in the Budget.”
He said India was disappointed with the slow pace of progress on the proposed broad-based trade and investment pact with the EU. “Both sides had announced the intention in October last year, and six months have passed. We had committed to the European investors that the negotiations would be completed within a year. However, the EU has not yet been able to obtain the approval of the EU’s council of ministers for the pact.”