Following complaints from the EU and US on high duties levied by India the Finance Ministry withdrew yesterday all additional customs duties (ACD) on imported wines, beer and liquor through a notification by Central Board of Excise and Customs.
All ACD on wines and spirits have been removed but the government has increased the basic duty from 100% to 150%. Duties on beer and liquor remains unchanged at 100% and 150% respectively.
The removal of the duty comes shortly before the meeting of a WTO panel to consider the complaint of European Union and the USA against high Indian duties and taxes on foreign wines and spirits. The government had been saying all along that they would like to settle the issue before the WTO would take a negative decision.
The government had removed the import restrictions on wine and liquor completely in 2001, but subjected these products to additional customs duties, also known as Counter Vailing Duties at specified rates, presumably to provide level playing field to the domestic manufacturers, This additional duty was over and above the 150 per cent basic customs duty on spirit and liquors and 100 per cent on wine and beer.
Before April 1, 2001, the import of beer and alcoholic liquor was exempt from ACD in lieu of state excise duty while import of wines attracted additional duty of Customs at Rs 9 per litre.
Several foreign liquor, wine makers and embassies started to complain to the EU, and a European Commission study was conducted, which determined that the combination of duties and taxes in some states in India was as high as 550 per cent on imported spirits and 264 per cent on wines, well beyond the norms agreed by India with the WTO. (An additional education cess of 1% had been implemented for al imported products from this fiscal)
Acknowledging this step, a ministry release confirms that some of the Indian trading partners (mainly EU and US) had complained that “the additional duty of customs is not equivalent to an internal tax within the meaning of GATT 1994, as the additional duty of customs exceeds the excise duty rates on like products in some Indian states”.
The ministry also said that they had decided to withdraw the additional customs duty after discussing the issue with state governments.
While the Centre has acted on the additional customs duties, which fall within the Centre’s domain, the government is expected to empower states to levy duties and allow them to recoup revenue losses. State governments are also expected to carry out a re-look of their duty structure to bring about parity between the levy on imported and domestic liquor.
The center is planning to bring the countervailing duty (CVD) on imported foreign alcoholic beverages in line with the state excise duties through the Countervailing Duty on Imported Alcoholic Liquors Bill, 2007. The Bill seeks to empower states to collect the countervailing duty on imported liquor, at the rate equal to each state’s excise duty on domestically manufactured liquor.
At present, the excise duty varies across states. Some states like Gujarat do not even allow the sale of alcohol. The Indian Constitution grants the states this privilege.
Subhash Arora
July4,2007
