India is likely to withdraw the additional Customs duty on imported wines and spirits from April this year. |
A decision in this regard is likely to be taken during the next parliamentary session, which starts from April 26. |
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Meanwhile, the European Union (EU), which has been demanding the removal of the additional Customs duty (countervailing duties) on foreign liquor, will ask for the formation of a panel in the World Trade Organisation (WTO) to settle the dispute. |
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"The EU is likely to ask for the formation of a dispute settlement panel in WTO on April 12," said a commerce ministry official. |
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The official added that the ball was in the finance ministry's court as the commerce ministry is in favour of scrapping the duty, which is not WTO compliant. |
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"The finance ministry was supposed to do away with the additional Customs duty during the Budget session of the parliament this year. As it was not done, they will be doing it in the next session of the parliament," said the official. |
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As per Indian commitments to the WTO, import duties on imported wines is 100 per cent while for sprits like whiskey and vodka, it is 150 per cent. |
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Additional Customs duty in the form of countervailing duty on imported spirits and wines was imposed in 2001 to create a level playing field between the domestic and foreign liquor companies as states cannot levy duties on foreign made liquor. |
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Industry sources maintain additional Customs duty in foreign spirits ranges from 25 per cent to 150 per cent while in imported wines it is 20 to 75 per cent. |
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But due to a combination of Customs and the additional duties, the effective import duty becomes as high as 264 per cent for wines and 550 per cent for whiskies, depending on brands. |
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Commerce ministry officials say India cannot escape being dragged to the WTO, as the EU is going ahead with their plans to convene the dispute settlement panel. |
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"The domestic industry in the EU has been lobbying for convening the panel. Once the additional Customs duty is waived, the EU is likely to withdraw its case from the panel," the official added. |
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Meanwhile, a draft Cabinet note on a proposed Bill, circulated by the finance ministry, seeks to empower the states to collect the countervailing duty on imported liquor, at the rate equal to that of state excise duties on domestically manufactured liquor prevailing in the respective states. |
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The law ministry and the finance ministry has given their nod to the draft Cabinet note. The financial implication to the Centre due to this proposed legislation is likely to be Rs 25 crore. |
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