India inches towards lower taxation on alcohol

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  • Tuesday 5 July 2011

India and the European Union are in the final stages of negotiating a free trade agreement that could result in a substantial reduction in India's high tariffs on imported alcohol.

Wine shop in India

Importing wine: restrictive taxes

India
and the European Union are in the final stages of negotiating a free trade agreement that could result in a substantial reduction in India’s high tariffs on imported alcohol.

The consumption of European wine in India, especially French, has seen a steady increase, with a 25% year on year growth of imported French wine coming into India in the last 5 years, according to the trade body Sopexa.

However, India’s import system is currently extremely complex.

As well as a flat 150% tariff on imported wine, the federal government imposes an Extra Additional Duty (EAD) of 4% on imported wines.

Then each of India’s 28 states levies its own taxes on alcohol, ranging from 30% to over 100%.

The trade agreement promises that India would lower the tariffs on imported alcohol in return for greater access to European markets for Indian firms.

The agreement, if signed, marks another step forward for wine producers in the EU. In 2007, the EU successfully campaigned for India to lower its duties on imported alcohol from 177% to 150%.

Rajiv Singhal, editor of Fine Publishing India Ltd, told Decanter.com that taxation on imported alcohol was a valuable and essential source of income for Indian states.

‘Alcohol is a big revenue earner for states, so states usually overtax because all other sources do not give them the desired amounts,’ he said.

Rajeev Samant, CEO of Sula Vineyards, one of India’s major wine producers, called the agreement: ‘a welcome and positive step forward in addressing the absurd levels of tax in India.’

A member of the Indian Commerce department told The Economic Times last week that the bi-lateral trade agreement would almost certainly be signed later this year.

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