Liquor industry wants more duties on imported stuff to remain

BS Bureau

The domestic liquor industry has asked the government to retain additional duties on imported liquor but wants level-playing field for the domestic players.

UB Group's spirits' division president V K Rekhi told Business Standard that the government in its February 28 Union Budget should retain additional customs duties till the domestic industry is freed from tough regulatory norms.

"The additional duties have brought about parity in the duties on imported and domestic products," Rekhi said. But warned that unless the government provides a level-playing field to its domestic players, the Rs 200 billion revenue, the liquor industry generates every year, could be wiped out.

Rekhi said the revenue contributed by the local liquor industry to the states is the second highest after sales tax. Foreign companies in India are, however, exempted from paying excise duty for importing bottled spirits. To maintain parity, the government has imposed additional import duties.

As per the World Trade Organisation norms, India was compelled to remove quantitative restrictions on all imports from April 1, 2001, but was allowed to impose duties on them to compensate for any loss of revenues for the local industry.

Last year, the government retained basic duty on imports at 210 per cent and a special additional duty at four per cent and imposed a three-tier additional import duty of 150 per cent, 100 per cent and 75 per cent depending on the price slabs. Hence, effective duties on spirits range between 464 per cent and 706 per cent.

The multinational companies want the government to bring down the basic duty on imports to 150 per cent from 210 per cent.

The secretary general of All India Distillers' Association L N Batra has said in a statement that the allegations of higher taxes on imported liquors compared with domestic products are false.

He said that cheap brands of Indian spirits are slapped extremely steep duties. For example, whisky with a price tag of Rs 200 per case is levied a duty of Rs 1,732.50 in Karnataka which works out to 866 per cent, nearly 160 per cent higher than the maximum duty imposed on imported liquor.

He said multinational companies do not have any maintainable case for raising the matter before the WTO disputes settlement body because the duty level on imported liquors is compatible with the World Trade Organisation regime which defines free trade in term of non-discriminatory treatment to both domestic products and imported products.

The multinational companies argue that doubling of customs duty to 464 per cent from 222 per cent had resulted in a mere 18 per cent increase in revenue but bottled imports of spirits after the duty was increased have declined 42 per cent over the previous year leading to more illegal imports.

They want the government to bring down the customs duty which they argue will lead to better revenues and control illegal imports.

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