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“A high-level meeting involving the Prime Minister’s Office (PMO), the Ministry of External Affairs (MEA), the Finance Ministry, and the Commerce Ministry is expected soon to discuss the proposal. The meeting is likely to assess the impact and whether a concession would mean greater market access for Indian players in the region in return or not, along with revenue impact,” sources in the know of the development told CNBC-TV18 on the condition of anonymity.
According to sources, “the government is exploring the possibility of allowing a 50% Basic Customs Duty (BCD) along with a 50% Agriculture Infrastructure and Development Cess (AIDC) on Scotch imports—similar to the concessions granted to Bourbon whiskey.”
Current Duty Structure and UK’s Demands
The current duty structure on the import of alcoholic beverages is subject to a 50% BCD plus a 100% AIDC, making it highly expensive for Indian consumers.
If the proposed change is accepted and offered to the UK, it will not only help close the long-pending FTA talks, but also the new structure would bring down the total levy substantially, aligning it with the duty regime for Bourbon whiskey and providing a level playing field.
“The UK has been pushing for a significant reduction in these duties on Scotch as part of the ongoing negotiations for a Free Trade Agreement (FTA) with India and if implemented, could be seen as a significant breakthrough in Indo-UK trade relations, benefiting both Indian consumers and UK exporters while also addressing one of the key sticking points in the FTA discussions,” sources added.
Industry body urges India govt to protect local companies
Meanwhile, the Confederation of Indian Alcoholic Beverage Companies (CIABC) has urged the government to safeguard the interests of Indian companies. It has urged that the reduction in duties should be given in a phased manner, ensuring better market access for Indian products.
The Confederation of Indian Alcoholic Beverage Companies (CIABC) has said the Indian liquor manufacturers were not against reduction in import duty, though they have sought the import duty cuts in a phased manner.
The CIABC has urged the government to address the concerns of the Indian companies and ensure a level playing field in FTA negotiations and set in stringent effective measures to check and curb the dumping of imported spirits and seek better international access to Indian alcohol products, which face several non-tariff restrictions at present.
CIABC, which is the apex body of Indian alcoholic beverage manufacturers, has also requested state governments to withdraw excise duty concessions given to imported liquor in view of the reduction in customs duty.
“The government needs to safeguard the interests of Indian liquor manufacturers while deciding on issues related to customs duty cuts (BCD+AIDC) and other concessions under FTAs. Though we have already recommended to the government to cut the basic customs duty on spirits over a period of 10 years, we also want the government to ensure better international market access and safeguard the interests of Indian companies against any dumping of products through the transfer price mechanism at lower prices specifically for India,’ said Anant S Iyer, DG, CIABC.
“We have also urged the government to take necessary steps to prevent dumping and tax evasion through under-invoicing or the transfer price route. Similarly, we have requested state governments to withdraw all excise concessions given to imported liquor as cuts in customs duties will further hit Indian products—both in the spirits and wine categories. It will be a double whammy for the Indian companies,” he added.
Iyer also requested the government to ensure better market access for Indian products into foreign markets. “Countries should remove non-tariff barriers which prevent a vast majority of Indian products being sold in the Western countries including the UK. CIABC has constantly been raising this issue with the government. We also want these markets to recognise Indian whiskies at par with other global products.”
The industry needs to be protected as there is always the fear of cheap imports in spirits and wines eroding the domestic industry, which has painstakingly over years built a portfolio of fine offerings. The beverage alcohol industry contributes over ₹3 lakh crores to the exchequers of state governments apart from revenue accruing to the Centre from Customs duty and GST on a host of inputs. The industry also provides substantial employment and sustenance to agricultural produce, he added.
The Confederation of Indian Alcoholic Beverage Companies (CIABC) is the apex body of the Indian Alcoholic Beverage Industry. Its members include major Indian companies that manufacture and market their product range in India and abroad. It represents the wide and inclusive interests of the Indian industry. As a responsible industry body, it also works for the collective interests of all stakeholders including the government, trade, society and consumers.
“Recently, India has reduced AIDC on Bourbon Whiskey by 50%, thereby bringing total duty on it from 150% to 100%. A similar relaxation, if provided for Scotch whisky under the India-UK FTA talks, will benefit Scotch imports from the UK. While the extent to which it will impact India’s growing local whisky market will have to be assessed, the government will surely look forward to important gains in lieu of this relaxation under the ongoing negotiations,” said Anurag Sehgal, Managing Director, Price Waterhouse & Co LLP.
