Trade deficit checks: Curbs on duty-free cigarettes, liquor proposed

NEW DELHI: Duty-free purchases of cigarettes and liquor at airports may soon get curtailed as India plans to put an end to cigarette sales and halve the liquor quota bought at airport stores in a bid to curb what are being regarded as unnecessary imports. The commerce department has proposed the move, terming such imports as non-essential and adding to the country’s trade deficit.

India currently allows alcoholic liquors or wines of up to 2 litres and 100 cigarettes or 25 cigars or 125 gm of tobacco per passenger.

Beyond this, an additional duty of 45% is levied over and above the actual tax.


“We are considering restrictions on duty-free products as these are unnecessary imports,” said an official aware of the development.

While the government doesn’t maintain data on imports coming through the duty-free channel, liquor, cigarettes, chocolates and perfumes are the biggest purchases at Indian airport stores.

“While there is no trafficking of these products at present, controls on duty free goods will lead to smuggling,” said an expert on condition of anonymity.

As per the official, the move to reduce the liquor quota is in line with the practice followed by other countries.

“The domestic market doesn’t offer so many quality cigarettes and liquor which need protection. It is about people’s tastes and preferences for products not easily available otherwise for which they are paying money,” said another expert.

In the April-December period, India’s exports fell 1.96% to $239.29 billion and imports declined 8.9% to $357.39 billion, leaving a trade deficit of $118.10 billion. In FY19, India’s total trade deficit was a record $176.42 billion.

“Goods bought duty free are meant for self consumption and is a globally accepted phenomenon. Putting controls on such items of personal consumption are unlikely to make a dent in the foreign exchange outflows,” said Bipin Sapra, partner, EY.

The proposal to control duty free products is part of the government’s overall plan to curb non-essential imports for which it has drawn up a list of 371 goods on which technical regulations need to be imposed and 200 products where duty hikes are possible. Separately, the commerce department has also asked traders to suggest appropriate HSN (harmonised system of nomenclature) codes for products imported by them that do not have any classification and fall in the ‘others’ category.

Of over $500 billion worth of imports in 2018-19, the ‘others’ category accounted for goods worth $130 billion.