Why imported Scotch whisky is becoming cheaper in India

Why imported Scotch whisky is becoming cheaper in India

The India-UK Free Trade Agreement (FTA) will come into effect on July 15, and one of its major impacts will be on the price of imported Scotch whisky and gin in India.

The FTA proposes a phased reduction in import duties on these beverages.

Initially, the import duty would be halved from the current 150% to 75%, and further reduced to 40% by the end of the 10th year.

Final retail price will not be equal to import duty-cut

Despite the significant cut in import duty, consumers shouldn't expect an equal percentage drop in prices.

Paul P John, Chairman of John Distilleries, explained that import duty is just one component of the final retail price.

Other costs such as state excise duties, VAT, distributor and retailer margins as well as logistics and marketing expenses contribute significantly to what consumers ultimately pay.

Initial benefit of 5-10% expected

John estimated that consumers could see an initial retail benefit of around 5-10%, which could translate into a few hundred rupees per bottle.

However, this would depend on the state of residence and the type of Scotch purchased.

In high-tax states like Maharashtra, customs duty makes up only 10-15% of the final retail price, thus limiting the impact of lower tariffs.

Impact varies across different states

In states with relatively lower taxes such as Haryana, prices could fall by up to 15%.

However, in states where government corporations control liquor distribution such as Telangana and Andhra Pradesh, the reduction may not immediately reach consumers.

This is because state authorities could absorb the duty savings instead of passing them on to consumers.