New Delhi has expressed its willingness to reduce duties from 150% to 40% on whiskies priced more than $7 per litre and wines above $4 per litre if the European Union gives more access to Indian services industry and labour-intensive goods, a government official told ET. This will make them 44% cheaper.
"We are ready to open our markets wider for European liquor. But the duty cuts will be above the stipulated threshold levels to avoid competition from the cheaply priced variety," the official said.
The offer, however, is contingent upon India getting its due in the area of services where it sees great opportunities in Europe, and gets more access for labour-intensive goods such as textiles and leather.
While European liquor, like all other domestic and imported alcohol sold in the country, will continue to attract state taxes-which ranges from 30% to over 100%-the incidence will be less as the taxes are mostly applied on landed price of alcohol in states, analysts.
"Most state government levy taxes on alcohol on the price at which they land in the states, which also includes the import duties. So, if import duties are slashed the incidence of state taxes will also go down," S Madhavan, partner affairs in charge at PwC India.
For instance, the landed price of a bottle of French wine priced $4 per litre is $10 after levy of 150% import duty.
If a particular state imposes 100% state duties on it, the price that the consumer pays for the brand is $20 per bottle, or about Rs 1,100.
Now, if India slashes import duties to 40%, then the landed price of the same wine will be $5.6. After levying 100% state duty it will be available to the customer at $11.2, or about 616, which is 44% less than the current prices. This will also make it comparable with several Indian wine brands.
While lowering of duties could give some competition to the country's wine producers, industry sources say that imported whisky from Europe will not impact local whisky producers as they cater to different segments.
"There is a wide gap between the most expensive Indian whisky and a standard Scotch whisky," a spokesperson of the Indian unit of Pernod Ricard, world's second-largest spirits maker, said. "For instance, a 12-year Scotch Whisky is priced at Rs 3,400 in Delhi vis a vis the most expensive Indian whisky at Rs 800. Even if the duty comes down, the Scotch whisky will be priced at more than Rs 2,500," the person said.
Of the total 240 million cases of alcohol sold in India, just about a million cases are imported.
Both India and the EU are keen to sign the FTA, formally known as the bilateral investment and trade agreement, by the end of this year. But for that to happen, a number of contentious issues including visas for professionals, recognition of India as a data secure country and easing of government procurement rules in India have to be ironed out.
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