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Scotch makers want low import duty

Keen to tap India's swelling liquor market, top producers of Scotch have petitioned the Indian Govt to reduce the basic customs duty.

india Updated: Feb 02, 2006 12:14 IST

Keen to tap India's swelling liquor market, top producers of Scotch have petitioned the Indian government to reduce the basic customs duty on its import.

The Scotch Whisky Association (SWA) has been seeking a reduction in Indian duties for some time so as to expand the market for Scotch and also ensure that genuine products reach Indian consumers.

The SWA believes that India is one of the most promising global markets for Scotch, along with China. Its international affairs director, Peter

Wilkinson, is currently in India to put forward the industry's proposals before Indian authorities.

SWA source saidthat the industry has made two key proposals:

* The basic customs duty on imported spirit drinks, including Scotch Whisky, should be reduced to a more reasonable level, from 150 percent to 75 percent. Research by RaboBank for the ministry of food processing industries has concluded that if the basic customs duty was reduced in this manner, there would be a significant shift away from the grey market to legitimate retail sales. In turn, this would also increase the Indian government's revenue.

* That a level internal tax playing field is introduced for imported and domestic spirits through the elimination of the additional customs duty on imported spirits (and its replacement by a levy identical to state excise duty on domestic spirits).

David Williamson, senior manager at SWA, said: "We continue to believe these measures would result in more affordable retail prices and more choice for Indian consumers, would boost Indian government revenue by encouraging consumers to purchase through legitimate retail channels, and would begin to meet the Scotch Whisky industry's aspirations for fair market access to India in line with international trade rules."

He said it was possible to eliminate counterfeit Scotch from the market by reducing the basic customs duty.

According to the trade association, Scotch whisky faces market access difficulties in India because of the very high import tariff burden and

because certain aspects of the fiscal regime for imported spirits are discriminatory, contrary to WTO rules.

Currently the overall duty burden faced by Scotch whisky in India is said to be between 212 and 525 per cent.

Indian spirits, in contrast, reportedly have tariff free access to the European Union, Williamson pointed out.

The basic customs duty of 150 per cent, he said, was very high by international standards, while an additional customs duty (25-150 per cent) inflated the overall tariff burden up to 525 per cent.

"The additional duty, in principle, should be levied on imported spirits in place of state-level excise duty. In practice, however, it is applied to imported spirits at a rate that is much higher than the excise duty levied on domestic spirits in most Indian states.

"In some states, despite the additional customs duty supposedly applied in place of state-level excise duty, imported spirits are required to pay both the additional customs duty and state excise duty. This has created a situation of double taxation. We are, therefore, asking that India bring the system into line with its WTO obligations, which requires that tax policy is not used to discriminate against imported products," Williamson added.

The British government has been backing SWA moves in India. Ian Pearson, Britain's trade minister, recently visited India and raised SWA proposals with Indian Commerce Minister Kamal Nath.

Every year, over two billion pounds worth of Scotch whisky is exported - equivalent of 70 pounds a second to the balance of trade - making the industry one of Britain's top five manufactured export earners.

This year, China has already driven the half-year figures for worldwide sale of Scotch beyond the one billion pound barrier - the first time since 1997.

First Published: Feb 02, 2006 12:09 IST