India Lifts Huge Taxes on Alcohol

The Indian government has lifted the massive taxes it imposed on imported wines and spirits, bending to heavy pressure from the United States and Europe.

India will relent on the additional duties it charged on wine and spirits, up to 540 percent in some cases, that Washington and Brussels are challenging at the World Trade Organization, according to Finance Ministry spokesman B.S. Chauhan.

But the country will keep in place its basic import duties on wine and spirits, which range from 20 percent to 150 percent. The basic duty on wines will increase to 150 percent from 100 percent, according to a government statement issued Tuesday night.

India is one of the world's largest markets for alcohol with a huge potential to grow, but imports account for a meager share in total consumption. The EU and the U.S. have complained that the tariffs represented unfair trade barriers keeping foreign countries from competing in India's market.

Foreign alcohol makers have long sought to more forcefully enter the Indian market, and groups like the Scotch Whisky Association praised the end of the taxes.

"Abolition of the discriminatory additional duty is a significant step toward fair competition in an important emerging market for Scotch whisky," Scotch Whisky Association chief executive Gavin Hewitt said in a statement.

The European Union, which is challenging India's import duties on wine and liquor at the WTO, welcomed Delhi's intention to repeal the various government surcharges that make Indian tariff levels on products ranging from Finnish vodka to French cognac among the highest in the world.

But EU officials said they regretted that India appeared set to raise its normal duty on wine to 150 percent from 100 percent, even if the new rate was still within its WTO limits. They said it was too early to speak about whether Brussels would suspend its WTO case.

The United States, which also filed a WTO case against the government surcharges, remains "hopeful that India will meet its WTO obligations in this area," said Stephen Norton, a spokesman for the office of the U.S. Trade Representative in Washington. He declined to comment further.

The Distilled Spirits Council of the United States said the change would benefit liquor exporters, but hurt wine exporters.

"While it is good news, it's not great news," spokesman Frank Coleman said, adding that a major question remaining was when India would implement the changes. "I don't think anybody is cracking their special bottle of single barrel bourbon just yet."