The complaint is the second in a row. A couple of months ago, India had blocked a similar investigation of a complaint filed by the European Union. Subsequently, a panel to investigate the matter was set up in the Dispute Settlement Board of the Geneva-based trade referee.
According to the WTO rules, a country can veto an investigation on charges of unfair trade practices like high duties or anti-dumping measures only once. A second request is approved automatically, paving the way for the setting up of a probe panel.
According to an Associated Press report from Geneva, the second investigative panel examining Washington's arguments will almost certainly be established at a meeting later this month of the WTO's dispute settlement body.
The commerce ministry officials said the veto power had been exercised in accordance with the WTO rules. However, the ministry has been in favour of doing away with the additional Customs duties on imported wines and spirits as it is not compliant with the norms set by WTO.
The veto move is being seen as aimed at buying time as investigations by panels in the Dispute Settlement Board take a long time. Moreover, the central government is likely to scrap the additional duty on imported wines and spirits from July 1 and empower states to charge a similar duty. The Centre may lose Rs 60 crore on account of the move.
India imposes an additional duty of 25 per cent to 150 per cent ad valorem on imports of spirits, while for wines, the figure ranges between 20 per cent and 75 per cent. Over and above that, a 4 per cent additional duty is charged on imported liquor.
All these duties are charged in addition to the basic Customs duty, which ranges between 100 per cent and 150 per cent. The effective duty is somewhere between 250 per cent and 550 per cent, depending on the brands and on the state.
Tamil Nadu goes further still, shutting out foreign alcohol and allowing shops to sell only Indian-made spirits and wines.
The Associated Press report from Geneva said India vetoing the WTO probe over US complaint temporarily delayed a US government complaint over allegations that Indian rules discriminated against products such as Napa Valley wine and Jack Daniel's whiskey.
The trade referee is already reviewing a European legal challenge of wine and liquor restrictions in a number of Indian states.
"The layers of Customs duties India applies to US products, in particular to wine and distilled spirits, are not in line with its WTO commitments," US Trade Representative Susan Schwab said last month while announcing plans to seek litigation.