EU to take India's liquor tax hangover before WTO

NEW DELHI: Pushing up prices of foreign liquor by imposing high state-level taxes could cost India dear. The European Union (EU) has threatened to start legal action against India at the World Trade Organisation-the multilateral forum for formulation and implementation of global trade rules-if it does not address the issue of some states imposing higher local taxes on imports than on domestic liquor.

It has said it will call for setting up of a dispute settlement panel at the WTO if the issue is not resolved by September this year. If the WTO finds India guilty of violating rules, it could allow the EU to impose trade sanctions like increasing duties on identified products imported from India.

Incidence of taxes on foreign liquor is as high as 200%-790% of the sale price, depending on the type and price of liquor and the state in which it is sold.

An official delegation from the EU, including trade and legal experts, is in New Delhi to hold discussions with the Centre and state government representatives on the issue on "discriminatory state taxes". The four states that have been identified by EU as ones violating the WTO clause for national treatment-a requirement which mandates that all member countries will treat imported goods the same way they treat domestic products-include Maharashtra, Tamil Nadu, Andhra Pradesh and Karnataka.

"We don't care how state governments structure their domestic levies. The only thing that we seek is that imported liquor should not be given less favourable treatment than domestic liquor," said EC head of unit (legal aspects of trade policy) Jean-Francois Brakeland.