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India’s protectionist duties violate WTO rules
India has been violating WTO rules for the past five years, according to a report published by the EU. An EU investigation into India’s tax treatment of imported spirits and wine has concluded that the country’s duty system unfairly distorts competition by subjecting imported wines and bottled spirits to a much higher tax burden than that faced by Indian distillers, obstructing market access for imported wines and spirits.
In the course of its investigation (prompted by complaints from the CEEV and the CEPS), the EU found that the Indian Government’s Additional Customs Duty of 25% to 150% contravenes its WTO commitments, which state that tax policy should not be used to protect domestic production by discriminating against imported products. This has resulted in a situation of double taxation.
The report also claims that the Extra Additional Duty of 4% introduced by the Indian Government earlier on this year is unfairly applied to imported spirits. In the strongly-worded report, the Commission claims that these duties constitute "blatant violations" of India’s WTO obligations and recommends that unless India moves to rapidly abolish them, the EU should start WTO dispute settlement proceedings.
With a population of over 1 billion, India is a consumer market with huge potential and represents a great opportunity for the European spirits industry, which estimates that India could buy up to 100 million cases of spirits per year. But, until now, importers of bottled spirits have not been able to make the most of this burgeoning market because of the federal duty burden imposed by the Indian Government, which effectively prices imported spirits out of the market.
Following publication of the report, Scotch whisky producers, who have waged a long battle for fair market access to India, are calling for early removal of tax discrimination in India. "The SWA hopes that India will now swiftly bring its fiscal regime into line with international trade rules without the need to resort to a WTO Panel hearing in Geneva. However, if no early change is made, we support the recommendation that the issue be referred to the WTO", says Gavin Hewitt, chief executive of the Scottish Whisky Association.
© db 9th August 2006