Even as the European Union has said it would demand WTO consultations with India on the tax regime on imported spirits and wines, the Indian government says that it has not violated any national treatment principle due to the levy of special duties on these products by Maharashtra and Goa.
The EU also feels that Tamil Nadu has adopted a restrictive practice for imported liquor.
"We will put forth our comments in the consultations with the EU," said a commerce ministry official.
Significantly, a similar complaint by the trade bloc at the WTO led to the elimination of additional Customs duty on imported liquor in 2007.
Currently, India charges a basic Customs duty of 150 per cent on imported wines and spirits.
After scrapping the additional Customs duty last year, the Centre had said that states could levy special taxes on imported liquor, which is equivalent to the state excise duties.
Constitutionally, states are responsible for levying state excise duties on domestically produced liquor, but cannot apply the same to imported liquor.
The EU has said that tax practices followed in Maharashtra, Goa and Tamil Nadu are in violation of the national treatment principle, according to which a country has to treat imported products on a par with those produced domestically.
Legal experts say that in the next 60 days, India will have consultations on the issue with the EU at WTO. "This time around, India has a strong case. The issue is likely to be resolved during the consultations," said a legal expert on international trade laws.
The EU has objected to the 'special fee' imposed by Maharashtra on imported wines as it exempts excise duties on locally-produced wines. Moreover, the EU feels that the 'label-recording' fee levied by Goa on imported liquor is discriminatory.
In case of Tamil Nadu, the trade bloc has alleged that there are restrictive retail and wholesale practices, as a result of which imported liquor is available only in five-star hotels.
Countering EU's allegations, legal experts say that Maharashtra levies excise duty on wine coming from other states.
"The move to exempt wine produced in Maharashtra from excise duty is for the benefit of local grape farmers," said the expert.
Moreover, Goa also levies excise duty on wines and spirits coming from other states.
