The rollback is expected to be effective after the forthcoming budget for 2011-12 is announced in the Lok Sabha on February 28. The measure is ostensibly to arrest the inflation this has been causing and was discussed at a meeting of the Prime Minister Manmohan Singh with his senior colleagues last month, according to a report in ET.
Ask any wine importer about the customs duties and you would always get different answers- 150% being the least likely. The basic duty of 150% is charged on assessable value which is the declared CIF value+1%. If the FOB value is around $1800 making it, say $2000 as the CIF value, the basic duty chargeable would be $3030.
Added to this is the 4% SAD. Since this duty is charged on the basic amount of $3030, this works out to $121.20 taking it to $3151. Then there is an education cess of 3% on all the duties. Of course, these additions would be further compounded by the VAT that has to be paid. Any interest paid on late de-bonding is also calculated on the total duty payable. Therefore, in all likelihood, the import duty you would hear, based on the cascade effects would be around 160%- 164%, a figure that would not be seen in any official document.
A provision of getting this amount refunded was made in September 2007, with submission of complex documentation including the proof for the payment of sales taxes. But the procedure is so complex and time consuming that most importers claim they don’t even apply for it. Difficult to digest, but no wine importer admits publically to have received it despite their readiness to part with the speed money- a prevalent practice in getting any refund from the government (some like the stream-lined income tax refunds excepted). The importers of bulk wine can of course claim credit if they are paying any excise duty.
The government now seems to be veering towards the view that this procedure is unnecessarily adding to the increasing inflation and logically SAD should not be levied to start with. If the waiver is announced, this could result in a small reduction in the retail price of imported wines. But the hotels and restaurants which are not paying any customs duties anyway would not be affected by this order.
Although it might not call for opening a bottle of Champagne, popping of a Crémant, Spumante, Frizzante, Cava or an Indian bubbly might be in order, since for a long time there has been no positive news on the duty front on imported wines and it might mean an onset of a thaw and help us keep our optimism from shaking.
Subhash Arora
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