You may have to wait a while before you sip into your glass of Black Label. The government?s plan to cut duties on imported wines and spirits may be delayed further with many states objecting to possible revenue losses from the tax cut. The move, sources close to the development said, was likely to result in an annual loss of Rs 25 crore.
According to the proposed duty change, states? levy would be the same for domestic and imported liquor. They would levy a new tax equal to the tax load from excise and other taxes like luxury tax imposed on domestic liquor.
This would be in contrast to the present system, where the countervailing duty (CVD) on imported alcohol is levied at an average rate of the excise duty in each state. It often results in the levy of CVD at rates much higher than the excise duty prevailing in a large number of states. Additional duties by states on imported liquor range between 177% and 540% of the basic customs duty.
At a meeting of the empowered committee of state finance ministers earlier this month, the Centre requested states to prepare for a change of duties from July 1. The proposal has already been vetted by the law ministry, which had earlier raised reservations regarding the rationale behind the move.
Following complaints by the US and the European Union to the World Trade Organisation (WTO) on the discriminatory tax regime that India has for imported wines, the commerce ministry had announced a change in duties from July 1, through a notification that it would be brought into effect immediately. The issue is now lodged with the dispute resolution cell of the WTO, which is set to discuss the issue in the first week of July.
EU estimates India’s Scotch whisky imports over $30 million, but it is a miniscule 1% of its total market, mainly due to the prohibitive duty structure. In 2005, India was reported to have bought bottled wine worth 6.4 million Euros against EU’s total bottled wine exports of 11.5 billion Euros.
The domestic liquor industry, too, seems unhappy with the move. According to industry chamber Assocham, the duty restructure would lead to the flooding of the Indian market with cheap liquor and would also affect employment. The domestic liquor industry provides employment to over 3-4 lakh people.