The Commerce Ministry has proposed a reduction in the basic Customs duty on scotch whisky to 75 per cent from the current bound and applied rate of 150 per cent for bottled imported spirits in the forthcoming Budget.

The ministry has also recommended abolition of the additional customs duty on scotch whisky. The additional duty was imposed on bottled imported spirits as a countervailing duty in lieu of states excise tax when Quantitative restrictions were removed in April 2001.

This duty is now sought to be removed as it is considered to be inconsistent with the requirements of the General Agreement on Trade and Tariff, 1994.

A cut in import duty on scotch is among the 100 budget proposals fowarded by the Commere department to the Finance Ministry for the budget. The proposals have been finalised on the basis of over 150 suggestions received from the various export promotion councils and commodity boards.

Reduction in Customs duties on imported liquor has been a key demand of countries like the European Union which had even threatened to take India to the World Trade Organisation if the duties were not brought down more so since European spirit producers are currently subject to the AD and the state excise tax in a number of states. The government had last year rationalised the import duty on bottled spirits.

The ministry's rationale behind a further cut in import duty is that the basic bound customs bound and applied duty at 150 per cent is very high even by international and Asean standards.

The high customs duty is giving rise to a 'grey market' and out of the estimated scotch whisky market of over 10 lakh (1.5 million) cases in India, 650,000 cases are locally produced counterfeit sold by bootleggers.

A lower customs duty is therefore expected to increase government revenue as more imported spirits would be sourced from official duty paid channels.

Comparative import duties on distilled spirits in Australia is 5 per cent, Brazil 20 per cent, Cambodia 50 per cent, Chile 5 per cent, China 10 per cent, Korea 20 per cent, Philippines 10 per cent, Thailand 60 per cent, Vietnam 70 per cent and Taiwan 0 per cent.

The ministry has also proposed removal of the excise duty of Rs 1000 per tonne on refined edible oils since other commodities such as wheat, rice, pulses, sugar which are also items of mass consumption are exempt from excise.

Commerce ministry has also proposed zero import duty on cut and polished diamonds and gemstones from five per cent at present.

The reduction in duty to zero per cent for cut and polished diamonds would result in a revenue loss of Rs 274 core (Rs 2.74 billion) and Rs 2.27 crore (Rs 22.7 million) in the case of gemstones, assuming the import volumes for 2003-04.