Reduction of taxes on wine and whisky has been a major part of negotiations with the EU, that has been going on since 2007 and involves both the EU and now UK under the mutual trade treaties discussion of which have been going on for 17 years with no results. The move ostensibly comes with the global pressure by President Trump on India to reduce tariffs. The executive order for reduction was signed just before Mr. Modi’s meeting with President Trump who professes to be a great negotiator. The move has helped the Indian government buy time till December this year when the two sides will sit down together to resolve the issue.

As a starter, the Modi 3.0 government had already reduced duty on Harley Davidson super motor cycles which are extremely popular in India but due to heavy duties have not been able to sell the huge quantities that they can otherwise sell.

Duty on wines made of grapes, and vermouth, as well as a few fermented beverages and unadulterated ethyl alcohol with 80% alcohol strength have been cut to 100%from 150%.  The import of these products was reportedly around $1 billion during the last financial year.

India’s duty on whisky and other alcoholic beverages have been an area of concern for most – from Australia to the UK, the European Union, Switzerland and the US. While India has slashed duties on Australian wine as part of the trade agreement a couple of years ago, the UK has been putting pressure to lower the levy for Scotch as part of the trade negotiations.  The EU has been demanding a reduction of the imported wines produced by its constituents.

In the Budget presented on February 1, the government had also slashed import duty on a range of products, including high-end motor cycles such as the iconic American Harley Davidson, in a move seen to be focused on escaping the heat on tariffs. But that has not stopped Trump from raising concerns over duties in India as he cited Harley Davidson as an example during an interaction with the media.

Alcoholic drink makers’ association CIABC immediately urged the government to impose stringent measures to curb dumping of imported spirits and ensure greater market access for domestic products. The Confederation of Indian Alcoholic Beverage Companies (CIABC) said the Indian liquor manufacturers are not against reduction in import duty, though they have sought the import duty cuts in a phased manner.

Subhash Arora