India tax cut ‘will not create boom’

The chance that India's government might slash taxes on European wine imports will make little difference, experts are warning, because states will continue to set their own taxes.

‘One of the fastest-growing markets for wine’…India

The federal government in India has signalled it may cut wine import taxes from 150% to 40%, but European exporters are not going to suddenly see a boom.

‘Even Indian wine producers find the different state laws on wine hard to deal with,’ said viticulture expert Laurent Mayoux, who visited India last year as part of a vineyard development project run by France’s agricultural, forest and fisheries office, FranceAgriMer.

‘It’s also a problem that when the national government lowers taxes, state governments tend to raise them. There is always the possibility that things will evolve over the next ten years, but we won’t be seeing any immediate boom,’ he said.

India, which has a population of over one billion, is one of the fastest-growing markets for wine, with sales rising by about 30% a year over the next three years, a report by the Indian office of French trade promotions body Ubifrance said.

However, a combination of India’s nascent and protectionist domestic wine industry, high import taxes, the range of different labelling rules required by different Indian states, as well as varying rates of additional state taxes, have kept imports low.

In his blog, sommelier Magandeep Singh also singled out the problem of state versus national taxes. ‘The last time [national] duties came down, states made some super-golden hay by increasing the excise taxes. These state levies vary from state to state, ranging from 60% of [the landed price] value plus importer’s margin in Delhi to an inexplicably alarming 170% in Andhra Pradesh.’

Indian wine imports for 2012 totalled €19.4m, with France, the leading wine exporter to India, accounting for €7.3m, Ubifrance said.

As part of ongoing efforts to establish a free trade agreement with Europe, Indian newspaper reports said, earlier this month, that India was prepared to lower wine import taxes to 40%.

European Union negotiators are said to have rejected the offer, saying taxes of 30% were the highest they could tolerate.

The EU trade office would not comment on the specific figures because negotiations were ongoing. No deadline has been set for the India EU FTA negotiations, which began in 2007, Ubifrance said.

Written by Sophie Kevany in Bordeaux