Centre ready to withdraw CVD on imported wine

With the European Union threatening to take India to the World Trade Organisation for "discriminatory" duties on imported wines and spirits, the Centre has offered to withdraw countervailing duties if the state governments agree to impose a duty equal to the excise on domestic liquor.

The commerce ministry today made a presentation on the issue before the empowered committee of state finance ministers on value added tax.

The Centre imposes countervailing duties (CVDs) on imported liquor depending on the quantity per bottle. States impose excise on local liquor and countervailing duty on liquor manufactured in other states or imported.

This amounts to double taxation of imported liquor and goes against the concept of national treatment under the WTO, according to which, foreign companies have to be given the same treatment as domestic companies within a country.

The finance ministry has now indicated to the commerce ministry that it is willing to withdraw the CVD if the states introduce a tax equal to the excise on imported liquor.

"The move would require the states to explore legal amendments under the Seventh Schedule or the Concurrent list," a government official said.

State officials said the committee had told the Centre that it would take a united stand. "States are willing to examine the proposal as it would mean additional revenue," a state official said.

Since imported liquor was not conferred under VAT, there would be no obligation on the states to have a uniform rate. At present, the states extend different treatment to imported wines.

Maharashtra, for instance, does not charge any duty on domestic wines while the duty on imported wine is 28 per cent. Tamil Nadu does not allow retail sale of imported wines.