US wants India to quash 4% SAD on wines, spirits

NEW DELHI: There is more good news in store for lovers of expensive wines and spirits. Prices of foreign liquor have already fallen down once this year, thanks to a reduction in import duties which may be slashed further.

The US has challenged the 4% special additional duty (SAD) imposed by India on all imported wines and spirits over and above the customs duties which are at the maximum permissible limit.

The dispute settlement panel set up at the World Trade Organisation (WTO) will look into the issue and give its verdict in January 2008.

Speaking to ET, commerce ministry officials pointed out that the US was challenging the SAD on the same grounds the EU and the US used to challenge the countervailing duties (CVD) on foreign liquor.

Since customs duties on wines and spirits are already at the WTO bound rate of 150%, there is no room for any other kinds of duty, they had argued. Bound rates are the committed levels beyond which a WTO member cannot increase the import duty on a product.

After the EU and the US filed cases at the WTO against India’s high import duties on wines and spirits, India removed the CVD on the products.

Although, simultaneously states imposed local duties on foreign wines and spirits at par with domestic liquor, the net effect was a reduction in prices of many varieties of imported liquor. While the European Union withdrew the WTO case after the removal of CVD, the US said that it would continue the case for some time to see how things unfolded after the removal of CVD.

It has now sought the removal of the 4% SAD, which it has argued, should also not be there as it increased the total applied duty beyond 150%.

Commerce ministry officials said that India’s argument has been that the 4% special additional duty can be set off against Cenvat, and thus it should be allowed to stay. Whether the arguement will hold water remains to be seen. “If the WTO rules against us, then we will have to remove the SAD,” the official said.