The European Union (EU) requested World Trade Organization (WTO) consultations with India on its domestic tax regime for spirits and wines, on September 22, 2008. This is to seek clarifications from India on the way tax legislation and other measures on market access for wine and spirits are applied in states such as Goa, Maharashtra and Tamil Nadu.

The custom tariff for imported bottled wines and spirits at the Indian border is already 150 per cent. Discriminatory internal taxation in some Indian states adds further to this burden for importers. For example, Maharashtra imposes a special fee on imported wines and exempts locally-produced wines and spirits from excise duty. Goa adds an import and 'label-recording' fee to the cost of imported wines and spirits. In both cases, internal taxes are applied only to imported wines and spirits, or at a much higher rate for imports than domestic goods. This is a breach of the WTO's national treatment principle, which requires that WTO members treat imports and domestic goods the same.

The request for consultations formally initiates a dispute under the WTO dispute settlement understanding. Bilateral consultations give the WTO members, in this case the EU and India, the opportunity to discuss the matter and find a satisfactory solution without resorting to litigation. If these consultations fail to reach a satisfactory solution within 60 days after the receipt of the request for consultations, the complaining party, may request the establishment of a panel.

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