WTO backs India on wine taxes

Excise duty not a cross-border measure, rules dispute panel.

A World Trade Organization (WTO) dispute settlement panel has dismissed the United States' complaint against India over the excise duties on foreign wines and spirits, according to sources.

In an interim ruling to the two parties, the panel vindicated India's stand that the excise duties levied by states on foreign wines and spirits were cross-border measures. The US maintained that the sales tax was collected through Customs duty and, therefore, amounted to a cross-border measure.

On July 3, 2007, India had repealed the additional Customs duties and the dispute should have been dropped once and for all.

Subsequently, the European Union suspended the dispute on the ground that India chose to repeal the additional Customs duty. The EU has time till June to decide whether to proceed further.

But the US, which is the other complainant, has decided to drag its feet by insisting that the panel must deliver a ruling despite the repeal of the Indian measures.

India marshalled all legal arguments to show that the measures challenged by the US have already been removed and there is no need for the panel to pronounce a ruling, legal analysts say.

New Delhi had earlier argued at the WTO dispute settlement body meeting that it had introduced appropriate changes in its tax regime and argued that there was no legal or material basis to pursue the case.