Additional Custom Duties Scrapped. The Facts

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duties2.jpg The Government of India has decided to remove additional custom duties on imported wines and spirits. Additional customs duties on imported liquor imposed by India ranged between 20-150% according to PTI. This was over and above the basic customs duty of 150% allowed by the WTO. The multiple duties took the overall taxes on wine and spirits upto 550% in some cases.

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India’s basic import duties on wines have been increased to 150% though. This is in line with WTO guidelines. The US and European Union had complained against India at the World Trade Organisation on high level of duties. Various states can still impose their own local duties on wine. However, these duties are imposed on all wines entering the state irrespective of whether they are imported or domestically produced wines.
This cut in duties will result in an annual revenue loss of Rs. 25 crore for the states. The domestic liquor market is concerned that this reduction in taxes will lead to the flooding of the domestic market with cheap liquor affecting the health of the market.
It is left to be seen how the different states will respond. They may increase taxes on all out of state wines to make up for some of the lost revenue and thus keep wines quite expensive. And with the increase in the basic custom duties, the prices of the most expensive wines may even increase slightly.
View our previous coverage on the Indian wine duties saga for background information. Subscribe to Sommelier India, India’s only wine magazine today.

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8 Comments

  1. Sourish Bhattacharyya on

    High import duties were never really the problem in the Indian wine market. The issue, which, sadly, nobody wishes to address, is that five-star hotels, the beneficiaries of the Commerce Ministry’s duty-free imports scheme for the last four years, haven’t cared to pass the benefits on to customers. Now that the additional customs duties are gone, the Indian market will be flooded with plonk from the European wine lake, because they’ll alone benefit from this move. Unless prices are brought down to rational levels, I don’t see wine consumption going up beyond the current minuscule levels. There’s no point celebrating the 20% YOY market growth when the base is very, very small. But will the hotels listen? And will the domestic wine producers see reason? We know very well that it doesn’t cost more than Rs 60 to produce a bottle of wine (and this cost price includes the bottle, cork and label), but the Indages, the Sulas and the Grovers are priced at Rs 450-plus. The first decision Grover Vineyards took after Brindco bought into the company was to raise the prices of the wines upwards from their already irrational levels. Like a frog in the well, our domestic industry, and our five-star hotels, just can’t look beyond short-term gains. Money doesn’t grow on trees, but it certainly grows on our wine bottles.

  2. There is not yet reason to celebrate. We need to see, wait and watch. The local governments will increase local levies minimizing the impact of the same.

  3. I would like to know from Mr. Sourish Bhattacharyya how is it possible to produce a bottle of wine around Rs.60, when a bottle costs around Rs.20-21, a cork around Rs.4-5, a label around Rs.1.5-2 a cartoon around Rs.1.5 (Cartoon costs around Rs.18-19 which contains 12 bottles)a capsule around Rs.2-2.5.
    These are only the costs of packaging the wine and a kilo of wine variety grapes cost minimum of Rs.26 of which we get only 500 ml. of final wine ready to de bottled.
    We are not even speaking of the process that the wine goes through and the expenses incurred for the same and still we are coming to a figure around Rs.70.
    Then what about the loans and interests, and the merketing and distribution expenses?
    As most of us know that every State in India is like a different country when we see the Tax structure.
    So I request Mr. Bhattacharyya to please let me know how can a bottle be produced in Rs.60?

  4. Both Prithviraj and Mr. Bhattacharya have made their points, but what a person like me (third person) has a perspective on the issue is that; while the wine is still sold at 3-4 times it’s production costs. Although your figures vary (keeping in mind they are hypothetical), they still do spill the same beans.
    Wish we could “cheer” in a more cost-effective way so that there would be more wine and more people to cherish them.
    Cheers

  5. Maitry Desai on

    As far as the additional state duties are concerned on the imported or domestic wines the state should not concentrate on the loss of Rs 25 crore but think about that if they open up the market for wine sell, the overall economy of the particular state will boost with respect to increase in businesses which can overcome the revenue loss of Rs 25 crore, state should concentrate on long term goal not short term. The most important factor which we should consider now one the domestic producer has to prove them with what palate/taste they offer to the consumer and secondly how to prevent the entry of cheaper wines in the market, if cheaper wines are of great concerned. Additionally, one should not ignore the fact that cheaper wines do carry some really good taste factor, it is just they are made with the concept of bulk production which makes them cheaper. Implementation of tax system accordance to sell of imported wines that would not drastically hype the prices of imported wines can be one solution in order to protect the sell of domestic wines, but it would be a total injustice to the consumer who will be deprived of the real essence of wine style and type that would be available in the market why make a point that imported wines which goes expensive with price are meant for elite class only! If imported wines goes expensive again then the consumer would be in biggest lost and for no prominent reason. And one should not forget the future prospect of wine industry, but if their is a restriction for buyer than what is the choice left for seller/producer!

  6. It is not classic wine that moves the market.It is the wine for masses that really builds up the volume.The discussion about cost of bottle,cap,cork,label,carton,interest,
    depreciation blah,blah are useless unless common man can afford to buy and drink wine regularly.It is up to the industry to decide where to cut costs and sell wine at a affordable price to common man.If they can not do it somebody will come and do it. Remember Air Deccan story and everybody followed them.

  7. Rajesh Swarnakar on

    Hi,
    Enough of this noise about duties on wine.The bottom line is if you want make wine within everbody`s reach, then we have to sale it on a price which is affordable by everyone.

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