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THE European Union (EU), which lodged a complaint at the World Trade Organisation (WTO) against certain fees and taxes imposed on imported liquor by Goa and Maharashtra, has now aimed its guns at the Karnataka government. According to a recent consultation request filed by the EU at the WTO, Karnataka too is applying discriminatory taxes against imported wine from the EU, which need to be removed.

In its communication, the EU said Karnataka appeared to be applying the “additional special fee” and the “special fee” in a way that subjects imported wines to internal taxes in excess of similar domestic products. “The additional special fee is not applied on domestic in-state like products and the “special fee” appears to tax imported bottled wines in excess of domestic in-state like products,” the communication noted.

Earlier, the EU had complained that Goa and Maharashtra applied certain taxes on imported liquor which is not applicable on domestic liquor. It also complained against the Tamil Nadu government which, it said, does not purchase European wines and spirits.

This is in violation of the WTO rule on national treatment for imports, the EU said. The US and Australia, too, joined the EU in its complaint against Goa, Maharashtra and Tamil Nadu.

The EU has requested for consultation with India on the issue to examine how it could be settled. If the EU is not satisfied with the consultations, it could file a dispute against India and let a panel of judges take a decision.

Last year, India had reduced its import duties on wines and spirits to 150% following complaints filed by the EU and the US at the WTO against import duties in the country being higher than levels committed at the WTO.

While India brought down its duties on foreign liquor to below 150%, state governments increased their taxes on imported wines and spirits. The WTO allows state taxes to be imposed on imports as long as they do not exceed the local taxes levied on similar domestic products.

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