Feb 03: There has been a lot of confusion about whether the import duty has been increased om wine and liquor in the Union Budget declared on Monday morning by the Finance Minister, but there has been effectively no change, according to reports so far, writes Subhash Arora
The TV news during and discussions after the budget were quite disturbing with the broadcasters announcing an increase of Agri-cess introduced this year. On some quick research I found that the Agriculture Infrastructure and Development Cess (AIDC) had been introduced and would be applicable to specific goods, such as alcoholic beverages, gold, silver, cotton, peas, lentils, apple, petrol, and diesel. Details showed AIDC to be at 100%, applicable from February 2, 2021.
But on detailed analysis one learnt that it was the mere financial jugglery that the Finance Minister Nirmala Sitharaman has come to be known for. This AIDC was increased on several items but as a counter balance the import duty was decreased by the same amount- from existing 150% to 50%, meaning there would be no change in the import duty. Import duty on wine currently, is 150%- maximum allowed under the Agreement with WTO. When pressurised by WTO after complaints were filed against India because of Countervailing Duties (CVD) that made the total duty 260%, India agreed in 2004 to remove the CVD but increase the existing import duty from the then 100% to 150%: this has remained essentially the same since then.
Budget 2021 also proposed an AIDC of Rs 2.5 per litre on petrol and Rs 4 on diesel. But rates of petrol and diesel have not changed because of equivalent reduction in other duties. Cess was also applied on gold and silver bars, crude palm oil, crude soybean, lentils, apples and peas.
No change is expected in the import duty but the optimists can hope that one day when the Agri-cess can be decreased or even eliminated, the basic import duty will still remain at 50%, effectively bringing a reduction in the duty. But as the realists would contend, taxes are normally not reduced in India, even though there is an accepted economics principle that when duties are lowered, volumes increase manifold and the gross revenues are increased.
But for the moment, we can breathe a sigh of relief that the import duties have been left untouched. Now one can hope that the Delhi government rationalises at least the excise duty in the new policy 2021-22 expected to be announced within a few weeks.
Subhash Arora
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