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New Delhi:India’s move to cut import duty on alcoholic beverages in the Budget while simultaneously imposing an Agriculture Infrastructure and Development Cess (AIDC) of equal measure may have been taken anticipating demand by UK and the European Union to lower tariffs on alcoholic beverages under future free trade agreements (FTAs).

The FY22 Budget cut customs duty on alcoholic beverages to 50% from 150% and simultaneously imposed 100% AIDC keeping the overall tax unchanged.

Britain was expecting a sharp cut in India’s basic customs duty of 150% on scotch whisky to further expand its third-largest market for scotch whisky by volume after France and the US, Mint reported on 12 March. However, it may have to now limit itself in negotiating tariff cuts from 50% after the change in the tax structure since domestic taxes such as AIDC are not usually part of negotiations under proposed FTAs. The same may apply to the EU with whom India also hopes to restart talks for a trade deal. India is a major market for wine, beer and champagne for European nations such as France, Belgium and Germany.

Emailed queries to the finance ministry remained unanswered.

Responding to a query posed by the UK during India’s recent trade policy review at the World Trade Organization (WTO) as to why New Delhi reserves its highest tariff rates for alcoholic beverages, India said: “The tariff rate on alcoholic beverages has been prescribed having regard to the nature of product and other considerations such as goods falling in the category of demerit goods. Moreover, the applied rate on alcoholic beverages is within India’s commitments under the WTO."

Both countries are now engaged in deepening their trade ties through an “Enhanced Trade Partnership" as part of the development of a road map that would lead to a potential comprehensive FTA.

In a joint statement during the five-day India visit of secretary of state for international trade Elizabeth Truss in February, both sides agreed to formally launch the partnership during the visit of British PM Boris Johnson to New Delhi expected in late April. UK international trade minister Ranil Jayawardena is expected be in New Delhi in early April to set the stage for the summit between the two prime ministers.

Vinod Giri, director general of the Confederation of Indian Alcoholic Beverage Companies (CIABC), in a statement, opposed any move to cut basic customs duty on scotch whisky and instead urged the Indian government to ask their British counterparts for removal of non-tariff barriers to allow easy export of Indian-made alcoholic beverages to the UK.

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