Less duty = More wine?

First of all, thank you everyone for the overwhelming response to the previous entry; it wasn’t the number of people who responded that has me beaming but the fact that everyone was polite and said, ‘please’. Mums the world over would be so happy.

Now onwards to the hot topic of the moment…

So a recent article in a newspaper sparked much interest because it divulged that India was considering lowering customs duty to 40%. The EU wants 30% but hey who better at bargaining then the Indians. And yet, in spite of such a promising future, I am not entirely excited. Here’s why.

The last time duties came down, states made some super-golden hay by increasing the excise taxes. These state levies vary from state to state, ranging from 60% of CIF value+importer’s margin (yes, they tax you for being profitable) in Delhi to an inexplicably alarming ~170% in Andhra Pradesh. Not that any of these deter people from consuming that vile vicious venom called alcohol but hey, maybe it’s the local governments’ way of showing they care.

So, to cut a story short, lowering customs in fact made wines more expensive!

Delhi state has not just maintained but also reduced excise rates in the last few years and they have even managed to take the entire system online thereby not only speeding up procedures for license renewals but also for year-round stock checks and deliveries. Bravo, I guess. But back not so long ago when custom duty was 200% the same Delhi excise was a mere INR150/bottle (~$2.3 as of 27th June 2013) roughly. Today when the custom levy stands revised at 160%, Delhi excise is calculated at the higher rate of 65% of CIF value + importer’s margin. The conclusion being that the significant drop in custom levies was negated by a corresponding (and disproportionate) increase in the excise rates. What kind of a deal is that to offer? The Godfather’s handshake I’d say.

A good case in point is imported Olive oil, the extra virgin kind. Duties on this were abolished (0%) and yet the product on the shelf barely saw much price correction. Oh, sorry, wait a minute, a few months later it became more expensive!? Only the powers that be can explain how the system works.

Between importer, state, trader, and retailer there are too many points where the price can get burdened with some levy, margin, or similar. What we ideally need is a uniform taxation policy, preferably a single-point transaction that treats the country as one entity and does not allow states such frivolity.

So, to conclude, am I in favour of reducing taxes: absolutely. But do I think reducing customs from a hefty 150% to a more sensible 40% will make a tremendous difference to the final price of a wine bottle, I will prefer to wait and watch before I pop some celebratory bubbly just yet.

So, all in favour of uniform taxation get in line, huddle and stay quite lest they hear you quibble and decide to not even grant the promised 40% relief. But hey, look at the bright side, even the US of A is battling the aftermath of the Prohibition era and each states’ quirky policies regarding alcohol. The day they manage to dissociate alcohol from the governing bureau that also handles tobacco, firearms, and explosives (!?) we may have someone solid and reliable to guide us along the way.

Till then, sit back, pour yourself something crisp and enjoy the lovely flavour of the volley of exchanges between the EU and our subcontinent of a motherland.