EU takes fresh action against India at WTO over high taxes

EU takes fresh action against India at WTO over high taxes

Brussels: The European Union, or EU, launched fresh action against India at the World Trade Organization, or WTO, on Monday, saying high state-level taxes were blocking European wine and spirits from its booming market.

The EU’s executive, the European Commission, said it was concerned about the way taxes and other measures on wine and spirits were applied in states such as Goa, Maharashtra and Tamil Nadu.

India agreed in July 2007 to eliminate special taxes on wine and spirits imports after the EU asked WTO to intervene. Brussels complained the taxes were as high as 550% for spirits and up to 264% for wines.

Despite the agreement, Europe’s drinks industry has complained that barriers remain at the state level. India is a potentially huge market for EU spirit and wine makers but sales in the country of European spirits, such as Scotch whisky, amounted to only €57 million (Rs374 crore) out of total exports of €7 billion in 2007. Exports to India from EU vineyards amounted to just €11 million out of a total €6 billion in the same year.

The European Spirits Organization, or CEPS, and the European Wine Companies Committee, or CEEV, acknowledged India made some progress in bringing down barriers to imports last year but welcomed the European Commission’s announcement of new action. “It is disappointing that trade barriers have now emerged at state level, and we hope that the WTO consultations lead to a mutually agreed solution," CEPS director general Jamie Fortescue said.

CEEV secretary general Jose-Ramon Fernandez said all they want was a level playing field for global producers seeking access to the promising Indian wine market in the benefit of both Indian wine enthusiasts and fair trade.

The European Commission said that despite recent amendments to laws, there were no clear indications that restrictive retail and wholesale practices in Tamil Nadu have ceased.

“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," it added.

If the 27-member bloc fails to reach a deal with India during 60-day consultations, it may ask WTO to open an investigation as in 2007, potentially leading to retaliatory countermeasures by the EU on Indian exports. EU trade chief Peter Mandelson has prioritized efforts to open up markets in developing countries.

William Schomberg contributed to this story