Just-Drinks reported recently on the fact that India may lower wine tariffs as part of the Free Trade Agreement (FTA) with the EU that is expected to be finalised this February. Customs duties on wine imported into India are roughly 160%. However State Taxes can also be imposed on top of this as alcoholic beverages are a state subject in India, so each state has its own rules and regulations and duties and taxes on wine.
The talks on the FTA have been ongoing since 2007 but have been held up over the issue of lowering import duty on cars and wines/spirits. The problem seems to be that the Indian government is insisting that it is unable to reduce tariffs as both products have a strong domestic lobby. The domestic wine industry has argued that lower tariffs would flood the Indian market with imported wines and have a negative impact.
However there have been indications that the Indian government is softening on the issue but the solution is likely to be complex. Subhash Arora of the Indian Wine Academy writes that even if the import duty is lowered various states may increase the duty on wines to neutralize the impact of reduction. He also explains that if the duty is lowered it may not be universal on all wines:
“Even the die-hard optimists would not bet on the treaty being signed in February, if wines and spirits were to be included in the duty reduction agenda of the FTA. However, it must be clear that the cheaper imported wines would be outside the purview of the FTA. In the past, the speculators who claim to be close to the political bigwigs, have suggested a 3-slab reduction – 150% (remaining same for cheaper wines), 100% (for medium price slabs) and 50% for the so called luxury wines. This seems to be a practical, fair and justifiable solution, for the moment. Specifically, import duties ought not be reduced on the cheap wines-say under $ 2 a bottle as this will be unfair competition for the fledgling Indian wine industry which has some serious players who will bring international fame to India in future.”
There are a lot of predictions about India’s potential wine boom if taxes are scrapped as they were in Hong Kong but this is pie in the sky. India does need to protect its own wine industry and whilst it would be fantastic for wine merchants outside India if taxes were scrapped, India’s own wine industry would be destroyed if this unlikely event ever happened.