India-UK trade deal: British cars get cheaper but Scotch has to wait

NEW DELHI: British car majors, including JLR and McLaren, have announced steep reductions in prices as the India-UK Comprehensive Economic and Trade Agreement (CETA) kicked on Wednesday. But your bottle of Scotch and Gin, as well as blended India-made whisky, will take time to get cheaper, with the filing and clearances from state excise departments expected to take at least a month. In any case the price cuts will be Rs 350-400 a bottle in case of imported blended whisky that costs around Rs 3,000, while for Indian-made blended whisky, known as IMFL in trade parlance, reduction may be by Rs 50-60 a bottle, unless companies decide to pocket the benefit and improve their margins. Close to 80% of the India's whisky imports from the UK are used for blending locally-produced whisky. For Liquor, Filing & Clearances From State Excise Depts Likely To Take At Least A Mth "Full benefits of India-UK FTA will be realised only if tariff rationalisation is passed onto the consumer and is not offset by additional state taxation or restrictive regulatory measures," said Sanjit Padhi, CEO of The International Spirits and Wines Association of India (ISWAI), which largely represents the interests of international players. Tariff applicability will be based on documentation, with companies required to file their declaration of origin to specify that the stock they have received is from the UK. For goods that leave Scotland's shores on Wednesday, the benefit will automatically be available. Each company will also be required to file the revised cost and other details with the state excise authorities. And, this process may take anywhere from 15 to 30 days. And, don't trust the states either, which may just decide to increase local levies. Alcohol is among the most taxed commodities in India, with govt imposing 150% tariffs, which will be halved under the UK CETA for Scotch and Gin, and then slide to 40% over 10 years. On top of that there is local taxes. According to ISWAI's calculations, for bottled-in-origin or imported whisky, taxes make up 60-61% of MRP in a state like Maharashtra, while it is 56% for Indian single malts. "...the tariff rationalisation (due to the FTA) is expected to result in a limited price reduction of around 12-13%, provided the benefits are passed on to consumers," the industry body said. "It is for the individual companies to decide on whether prices will be reduced given the duty cut and benefit passed onto consumers. Pricing is a very complex mechanism as States control supply and consumer prices," said Confederation of Indian Alcoholic Beverage Companies DG Anant S Iyer. Car companies have, however, gone ahead and passed on the gains from the trade deal. Some British luxury carmakers had already moved to pass on the expected duty benefits to customers. JLR India was the first to announce price cuts on select UK-built Range Rover models. In May, the company reduced price of UK-built Range Rover SV by Rs 75 lakh to Rs 3.5 crore, while the Range Rover Sport SV became Rs 40 lakh cheaper at Rs 2.4 crore. JLR said the revisions were made in anticipation of the lower import duties under the FTA and were aimed at passing on part of the expected savings to customers. The price cuts are limited to vehicles imported from the UK. Defender and Discovery remain unaffected as both models are manufactured at JLR's Slovakia plant and therefore do not qualify for the tariff concessions. McLaren is reportedly looking to significantly rework its India pricing. Industry estimates suggest the British supercar maker could cut prices across its portfolio by nearly 38%.