World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

Reply: There is no such proposal under consideration.

WTO Secretariat' s report, page 50, para.45

According to the Secretariat's report, the average tariff declined reflecting India's shift towards lower tariff. Thus, the average effective applied MFN tariff fell from 15.1% in 2006/07 to 12% in 2010/11. However, the average total duty rate, including extra charges (additional customs duty, special additional customs duty, some cesses and charges), shown in Table III.8, attained 25.6% in 2010/11. For HS 01 24 the average total duty including extra charges amounts to 42.6% and for HS 25 97 to 23.1%. These averages compare to effective applied MFN rates which are respectively 35.1% for agricultural goods and 8.6% for industrial goods.

Duty rates including extra charges range across the board from 0% to 527.4%. The highest rates apply to beverages, spirits and tobacco (23.9% to 527.4%), and transport equipment (0% to 107.1%). The authorities noted that some of these extra taxes are "in lieu" of domestic taxes.

11. 
    How does India explain the difference between the effective applied MFN rates to which it committed in the WTO and the applied –higher  total duty to which certain goods appear to be subjected? Is India planning to reduce in a significant manner such levels of taxation in line with decrease in the applied MFN tariff?
    

Reply: India's effective applied MFN rates excluding duties equivalent to internal/domestic taxes, are within its WTO bound levels. The levels of duties equivalent to internal taxes such as excise duty have also come down in the last few years in keeping with the reduction in excise duty rates from 16% in 2007 08 to 10% in 2010 11.

11. 
    With regard to wines and spirits and passenger cars, could India indicate what taxes applied to imported products are "in lieu" of domestic taxes?
    

WTO Secretariat's report, page 52, para. 46

India notes that it intends to remove the cascading effect of taxes and provide a common national market for goods and services through the introduction of GST, hopefully in 2012. Economists have estimated that India's GDP could be boosted by as much as 2% by the successful introduction of GST. However, this is dependent upon the application of the tax to all goods and services at a uniform rate.

Under the provisions of the draft Constitutional Amendment Bill currently being considered by Parliament, a number of important sectors including petroleum products, natural gas, real estate and alcoholic drinks are specifically excluded from the scope of the new tax arrangements.  This will limit the overall benefits of the GST and create distortions in the market.

Reply: Alcoholic liquors currently attract basic customs duty of 150% but are fully exempt from additional duty. The levy of 4% special additional duty is applicable to imports of alcoholic liquor in lieu of internal taxes.