EU seeks WTO aid over Indian state-imposed tax concerns

By Neil Merrett

- Last updated on GMT

Related tags: International trade, European union, World trade organization

The European Commission is seeking talks with the World Trade Organization (WTO) over state specific taxing in India, amidst claims from wine and spirit makers that their exports are being damaged as a result.

The European Spirits Organisation (CEPS) said that some state authorities are undermining efforts taken by the Indian government since last July to curb additional taxation on foreign alcohol products.

The claims reflect an ongoing battle by drink makers across the EU and the US to secure easier access to emerging markets for their goods, particularly in Asia.

In a joint statement with wine industry association the Européen des Entreprises Vins (CEEV), CEPS claims it has evidence that the states of ​Maharashtra, Goa and Tamil Nadu have imposed their own tariffs on imported wines and spirits.

State of play

According to the association, in Maharashtra, ‘tax holidays’ have been granted for domestically produced wines, resulting in foreign-sourced products being marked up by as much as 200 per cent.

In other areas such as Tamil Nadu, authorities are alleged to have restricted retail distribution of EU wines and spirits, while it is claimed that the state of Goa has imposed higher internal taxes on imported alcohol.

Goa and Maharashtra are thought to amount to half of the overall demand for products in the country, the associations claim.

Jamie Fortescue, director general of the CEPS said that the intervention of the EC on adressing the issue would be a vital step in its efforts to create tax parity for global alcohol makers.

“The European spirits industry fully acknowledges the significantprogress India has made on market access for wines and spirits, especially the removal of the ‘Additional Duty’ in 2007,” he stated. “It is therefore disappointing that trade barriers have now emerged at state level, and we hope that the WTO consultations lead to a mutually agreed solution.”

CEEV secretary general, José-Ramón Fernández, said that it was concerned that the state-imposed tariffs would prove to be detrimental to the entire global wine industry.

“It does not seem acceptable to allow for the reintroduction at state level of the illegitimate restrictions which were intended to be removed at federal level,” he stated. “All we are asking for is a level playing field for international producers seeking access to the promising Indian wine market in the benefit of both the Indian amateurs of wines and fair trade.​”

According to CEPS estimates, India consumes over 100 million cases of the products, and 200,000 boxes of wine. For spirits alone, this demand is estimated to provide an additional €57m in the coffers of European producers.

Additional duty

European producers believed that they had secured victory in their attempts to expand into this market last July, after India’s Central Board of Excise and Customs (CEBC) agreed to drop additional duties on foreign alcohol products.

The CEBC said at the time that the additional duty imposed over the 150 per cent basic customs charge on spirit and liquors and 100 per cent on wines and beer would no longer be permitted, following consultation with its state governments.

As a result of the amendments, an agreement wa made to lift the basic charge on wines and beers to 150 per cent, in line with changes on the spirit sector.

Opponents of the charges had agued that tariff rates ranging from 177 per cent to 550 per cent were not "equivalent to an internal tax"​.

US efforts

Attempts by other national alcohol producers to influence overall Indian policy have not been as successful though. In February of this year, India was cleared by the WTO of unfairly discriminating against US wine and Spirits groups through its import duties policy.

Speaking about the decision, WTO officials said that amendments made by India's CEBC to its tariffs ensured that it was in line with their trade rules,​ according to the Dow Jones Newswire service.

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