The issue with Tariffs

Many of you know that the Scotch whisky industry is having an issue with the Indian government over the production, marketing, import and export of alcohol.

You may also understand that part of the issue is with the use of Scottish sounding names (partially solved by an Indian High Court ruling), and the erroneous use of the term "whisky" which I talked about here.

But an even bigger issue is around punitive restrictions and unfair tariffs imposed on import spirits by the Indian government. Access for Scotch whisky to the Indian market continues to be unfairly restricted by discriminatory fiscal barriers, which fly in the face of WTO rules.  I thought I'd try to clear this up so we all know exactly what the issues are.

Bottom line: The overall tariff burden faced by Scotch whisky in India is between 225% and 550% - in contrast, Indian spirits are able to enter Europe tariff free.

There are two aspects to the Indian system:

1. A Basic Customs Duty of 150%, which is very high by international standard, and,
2. An Additional Customs Duty, which inflates the overall tariff burden up to over 500%.   

The Additional Duty, in principle, should be levied on imported spirits in place of State-level excise duty. In practice, however, it is applied at a rate that is much higher than the excise duty levied on domestic spirits in most Indian States. This is a breach of India’s WTO obligations which requires that tax policy is not used to protect domestic production by discriminating against imported products. 

In some States, despite the Additional Duty supposedly applying in place of State-level excise duty, imported spirits are required to pay both the Additional Duty and State excise duty.  This has created a situation of double taxation.

David Williamson of the Scotch Whisky Association tells me:

We have raised industry concerns over a number of years and continue to work towards an early agreement that will allow fair market access for imported spirits, in line with India's international commitments.

Let's address another issue: there have been claims that Indian spirits cannot be sold in the European Union. 

This is absolutely false - Indian whisky made from grains can be and already are sold in the EU (Amrut is an example of an Indian grain-based whisky sold in the EU).  In keeping with traditional international practice, the EU requires whisky to be produced from grains and aged for a minimum of three years.  Over 70 countries and the World Customs Organization recognize this position.

Outside of India, regulatory bodies are working to ensure that consumers are not deceived. As a result these Indian molasses products cannot be called whisky and be sold internationally.  They can, however, still be sold in the EU (and likely the U.S.) provided they are labeled appropriately. This protects consumers and ensures fair competition in the international whisky market.

This goes to my point that Indian whisky could assume another name (Rum for example) and be more freely sold internationally. Instead, inexplicably, some Indian distillers have decided to take a molasses-based product, flavor it to imitate traditional grain whisky; bottle it without the benefit of any maturation; and label it to imitate Scotch whisky.

The saddest thing is all of the Indian "whisky" lovers who may never have had a real whisky. Maybe we should arrange an air-drop of some selected malts? Once they've had a proper Scottish malt, they'll never go back to whisky-flavored rum!

Comments

[Angelica]

Hi

Your article with regards to the Tariffs in India is very interesting. I was wondering whether you have any information with regards to the Brazilian market (taxation issues and impacts on pricing etc)

Best regards

[karsh]

Agreed that the tariffs dont let the Indians get their scotch whisky from a shop! That does'nt mean they dont get it, that they dont drink it, that they dont appreciate it already.

Like they say..
Where there's a will, there's a way.

And the more they stay away from India, the more enigma they keep and the more they are wanted in India. If they were sold at every street corner, I doubt it would do any good to the brand of scotch whisky.