The Hindu Business Line : Ministry wants CVD on imported wines, spirits to go

New Delhi June 6 The Commerce Ministry is making a strong case for removal of countervailing duty (CVD) on imported wines and spirits in the wake of concern expressed by developed economies that layers of Customs duties act as a barrier to market access.

Apart from basic Customs duty, imports of spirits and wines attract additional customs duty (in lieu of excise duty levied by States) and four per cent special CVD (in lieu of VAT).

Highly placed sources in the Commerce Ministry said that it was in favour of removal of the CVD and has already taken it up with the Revenue Department.

"We hope to get a positive reply by June-end," a top Ministry official said.

It is understood that the Revenue Department is not opposed to removal of CVD but is keen to have a legal framework that would bring parity between the level of taxes imposed on imported and domestic manufactured liquor.

Currently, imported liquor is subjected to more taxes than domestic liquor; hence, the call for level playing field by importers.

Legal hitch

The legal hitch is that the States are not allowed to levy any import duty. In the case of liquor, States alone are empowered to levy excise duty.

The variable excise duty rates of the States have added to the woes of the importers, as the CVD has been determined as an average of the excise duty rates.

Meanwhile, India is faced with the threat of a WTO probe on this issue.

It has, however, successfully vetoed WTO probe in the matter following complaints lodged by the EU earlier and the US recently.

But New Delhi cannot veto again and therefore, the Commerce Ministry is pitching for some action to take on board the concerns voiced by trade majors on this issue.

Price reduction unlikely

But importers in India are somewhat sceptical about removal of the CVD and were not willing to take a call on whether removal of this duty would translate into lower selling prices.

"I am cautiously optimistic about the doing away of countervailing duty. Even if the duty goes, I do not expect the landed cost of import consignments to reduce in the same proportion," Mr Harish Moolchandani, Managing Director of Beam Global Spirits and Wines, told Business Line.

The company manufactures Teachers Scotch Whisky in the country.