by Subhash Arora
The excitement due to the scrapping of the additional customs duties (ACD) may be short-lived as the worst fears of States deciding to add extra duties have already started to come true. Maharashtra, the leading wine producing state
in the country has implemented a special ad valorem duty on imported wines and spirits. A special fee of 150 % on wines imported into the state will be levied on the assessable value. This will result in a price increase of about 25%, almost fully negating the benefits of duty reduction. This goes into effect from the new lots of wine entering Maharashtra.
"The duty has been revised to provide a level playing field for domestic manufactures," said Maharashtra State Excise Commissioner Ramanath Jha. The official notification has been issued.
The special duty in case of Liquor is going to be 200%.
The knock-knead decision of the Government of India given out in haste was in part due to the mounting pressure from European Union and the United States. Although it had announced earlier that legislation would be passed in the parliament, authorising the states to charge the maximum duty on imported wines at the same level as the Indian wines, the Government changed its stand last month and announced that an agreement had been reached with the states and that duties would be reduced from July 1. The official announcement came on July 3.
What it didn't admit then was the fact that the states had been taken into confidence that they would be allowed to deal with the excise issues at their own will. This was to 'throw chillies in the eyes' of World Trade Organisation.
As expressed by Kapil Grover in our earlier news report, the Indian producers outside Maharashtra also must pay 150% special duty on their assessed value, including Grover Vineyards, based in Bangalore. Therefore, even the legislation would not have helped matters in Maharashtra, which has about 35-40% consumption of imported wines.
It is not yet clear what happens to the special fee on the expensive wines where the basic duty had been increased to 150%, making them already more expensive than before. If the fees are levied uniformly, the premium wines could become 25-30% more expensive than before.
Overseas wine companies will now have to wait till the pressure mounted by the Europeans and Americans in their case at the WTO is decided in their favour. Both had received the news of duty reduction with guarded optimism. Although they are expected to continue pursuing their case with renewed vigour, the European Union has, at least provisionally, suspended its panel against India at the WTO.
