Indian states may have to cut duties on liquor, since the European Union has requested talks with India to make its liquor market more accessible, reports CNBC-TV18.

India is the world's largest whisky market and a major consumer of other spirts and wines. For the past five years, India has lifted curbs on imports but has replaced them with high duties. The European Union has been trying to prise open this market without much success. It has now requested consultations with India, which is one step short of moving the WTO dispute settlement process.

India imposes the maximum permissible customs duty of 150 per cent on spirits and 100 per cent on wines. The EU does not object to it as these are WTO compatible. It has an issue with state levies in the form of additional duty and extra additional duty that vary across states. These are more than the excise imposed on domestic liquor in at least 10 states. These are discriminatory and violate the WTO principle of national treatment.

"This is something that we will have to discuss with EU so that states can honour national treatment and protect domestic industry," says commerce secretary, G K Pillai.

India finds the EU quite restrictive as well. Indian spirits are almost all made from molasses. The EU terms Indian whisky as rum and does not allow it to be imported even as Indian whisky or whisky made from molasses. India is likely to raise this issue during the discussions.

States also impose taxes on imported liquor under various guises like vend fee, library cell and tax department development fee. The EU has calculated that these taxes put together inflate the landed cost of imported liquor by 252 per cent to 550 per cent. These high taxes go against the spirit of liberalisation.

Recognising this, under the current Doha round, the government has offered to cut the maximum permissible customs duty on imported liquor from 150 per cent to 90 per cent.