New Delhi, June 24: The Centre is likely to abolish the countervailing duty on foreign liquor. However, there may be a delay in removing state taxes on foreign liquor such as Scotch because the EU is yet to give access to Indian whisky brands.
Top officials said the removal of the countervailing duty would bring down the customs levy on a bottle of imported liquor to 150 per cent. This is in line with the specifications of the World Trade Organisation (WTO).
More time will, however, be taken to abolish the state taxes that push up total levies on imports to 300-550 per cent.
The officials said they wanted the EU to scale down its position on the sale of Indian whiskies before giving foreign liquor companies a level-playing field in the country.
State governments will have to work on a fresh structure for taxes on foreign liquor to bring them on a par with levies on domestic companies. “This will take time ... it cannot be done overnight,” the officials said.
As the states work on the levies, India will try to persuade the EU to change its stand on whisky.
Since much of the trade diplomacy has been reduced to a tit-for-tat, India is unlikely to fully open up its market unless the EU softens its stand on whiskies.
The EU is opposed to the Indian-made spirit to be branded as whisky. It says the spirit has to be made from grains and not cane-based molasses as is done in India.
However, the officials are confident of finding out a way for the whisky in Europe.
A compromise might be worked out under which the label on bottles will read as whisky from India but made in a different way.
European whisky and wine makers are in a rush to prise open the fast growing Indian market for spirits.
The liquor market in the country is estimated to be Rs 30,000 crore a year, making it one of the largest in the world.
In India, the size of the whisky market is 70 million cases. The market is reportedly growing at a rate of 25-30 per cent a year.
Sales around the world are, however, declining.
Scotch distillers, which have been eyeing India for long, sell just about 80 million cases a year.
High taxes mean imported whiskies make up just 1 per cent of the Indian market, which is one of the largest in terms of volume. This has enticed European and US liquor companies to lobby their governments to approach the WTO against the taxes in India.
Earlier this week, the WTO set up a panel to investigate tariff on wine and distilled spirits. Both the EU and US have complained about the “excessive duties” on alcohol that violate trade rules.
Trade relationships with the EU and US have worsened following the collapse of WTO trade talks under the Doha round on Thursday.
A reason for the failure of the talks is India’s refusal to open up its agricultural markets to products from the US and EU.