India-EU Wine Deal to Slash Import Duties

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May 28 – India has been in discussions with the European Union for some four years concerning duties on imports of wine, currently some of the highest in the world. However the price of imported wines in India could soon be cut dramatically, with a rise in Indian domestic consumption in the cards for suppliers. In a tit-for-tat deal, allowing the European Union vastly improved access to Indian markets will also see doors open for Indian products to Europe – with a massive boost in trade prospects expected on both ends.

Imported wines in India currently attract a 150 percent tariff, in addition to an “extra additional duty” of 4 percent. Taxes – at varying rates – are then imposed by India’s individual states. These vary from between 30 percent to 100 percent depending on the state, and have made India much of a wasteland for decent quality imported wines. Low-end brands that would retail elsewhere in Asia for US$12-US$15 typically cost upwards of US$50 a bottle. The proposed EU-India agreement would reportedly reduce import duties to 40 percent, boosting the sale of wines in many states. However, Peter Shakeshaft, chief executive and founder of wine investment company Vin-X, believes that the impact of the agreement will be more gradual.

“Wine has a rich history in India and the country has a real affinity with certain labels of Bordeaux such as Chateau Cos d’Estournel. As a result, we are able to predict individual labels which will benefit from the changes and advise investors accordingly,” according to Shakeshaft.

“The consumption of wine throughout the Indian sub-continent and in Persia was common 1,000 to 1,500 years ago,” says Chris Devonshire-Ellis, principal of Dezan Shira & Associates. “In more moderate Islam it was acceptable – in moderation – and the Sufi poet Rumi is well known for his verses comparing God with the delights of the grape. A market for wine in India is definitely in the offing as at present the choice is either between light lager brews, or whiskies and gin, with no established middle ground for alcohol consumption. I look forward to these changes taking place.”

India is a rapidly growing market and the demand will only get higher with the proposed changes. Like other areas of Asia, wine has grown immensely in popularity in India over the past decade, as a rapidly expanding middle and upper class can increasingly afford high value imported products. Wine imports have doubled over the last two years, and with India’s consumer markets expected to quadruple over the next two decades, the lowering of import duties is expected to have a significant impact.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in India. For more information, please contact india@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

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