Taxing Times For Wines

If you’ve ever wondered why wines in India are so expensive and unevenly distributed, Sumedh Singh Mandla offers an insider’s take on the topic

 

- Sumedh Singh Mandla

As a wine lover, I hate the fact that the cost of wine is prohibitively high in both HORECA as well as wine stores in India. I firmly believe that this is one of the key reasons for the slow growth of the wine industry in India. This becomes a handicap not only when undertaking new trials or recruiting in this market segment but also compels potential wine consumers to shift to beer, RTD (ready to drink packaged) soft beverages or other economical alternatives. Let’s examine some of the key issues here.

High entry cost

Having spent more than nine years in the wine and spirits import business working with producers and wine groups from over 16 countries, I was acutely aware of their discontent regarding the high and dual taxation currently prevalent in India. The lack of uniform policies and multiple levies across the country made it difficult to develop business organically. Under India’s central taxation, customs duty applicable on imported wines is 162% of CIF value. This crosses the maximum percentile of duty and is probably the highest levied by any country.

Since there is no central taxation on Indian wines, the international wine companies are of the opinion that the rationale for this is to support the Indian wine industry and slow down the progress of international wines in India. However, with first-hand experience of running Grover Zampa Vineyards for over four years, I believe the growth of the Indian wine industry has not reached its full potential. Indian producers may not pay customs duties, but the entry and distribution cost of doing business is very high and hinders growth. The concern here is that wine and domestic spirits are pegged together and subject to similar entry costs and barriers, despite the fact that the domestic wine industry is less than three million cases as against spirits’ 320 million cases.