INDIA TO LOWER WINE AND SPIRITS TAXES, PRE-EMPTING POTENTIAL WTO RULINGS

The Indian government moved this week to scrap a range of taxes on imported wines and spirits that had become the object of complaints at the WTO.

In separate cases, the EU and the US have alleged that India was imposing a series of additional charges on foreign wines and spirits, pushing total taxes as high as 550 percent - well in excess of the country's bound ceiling rate of 150 percent. These charges, they argue, have effectively barred their exports from one of the world's largest and fastest-growing markets.

WTO Members agreed on 20 June to establish a panel to investigate the US's claims. A separate dispute panel had been created in April to examine the EU's virtually identical complaint (see BRIDGES Weekly, 25 April 2007). Adding to the pressure on New Delhi, Australia, Chile, Japan, and Vietnam recently became 'third parties' to the US' claim. This allows them to present views and concerns to the panel. WTO law does not, however, give third parties the right to retaliate in disputes.

India's move pre-empts any rulings in the two cases. Citing finance ministry officials in New Delhi, Associated Press reports that India will remove the 'additional customs duty' but maintain tariffs ranging from 20 percent to 150 percent on spirits, and will even raise the basic duty on wines from 100 percent to 150 percent.

Both the EU and the US are waiting to see how the new duties are implemented before deciding whether to pursue their cases. State-level liquor taxes in India might still irk would-be exporters. Nevertheless, EU whisky makers welcomed the announcement, as did Indian importers.

Notably, New Delhi's decision to lower the duties was announced only weeks after Indian liquor baron Vijay Mallya purchased Scotch whisky producer Whyte and Mackay, a company with a major interest in exporting to India.

ICTSD reporting; "India Lifts Huge Taxes on Alcohol," ASSOCIATED PRESS, 4 July 2007; "Whisky exports set to rocket as India scraps punitive duty," THE TELEGRAPH, 5 July 2007; "Whisky joy as India drops duties," BBC NEWS, 4 July 2007;"Importers cheer as ACD on spirits is scrapped ," PRESS TRUST OF INDIA, 4 July 2007.