The Indian government has refused to back down in the row over the country's duties on imported spirits.

India has been facing growing international pressure to reduce the tax on products imported into the country but has stood firm in its annual Budget, which was announced today (28 February). The announcement is likely to dismay sections of the spirits industry as there had been indications that India might reform its tariff regime.

The UK-based Scotch Whisky Association, a vocal critic of Indian spirits taxes, said today's Budget had been "a last opportunity" for India to reform its system.

The SWA is now urging the EU to press ahead with its threats to take India to a WTO arbitration panel. Brussels has threatened to push for WTO arbitration if India fails to meet the EU's demands for a fairer tax structure, while the US and Australia have also asked for the WTO to intervene on the issue.

Gavin Hewitt, chief executive of the SWA, said: "Regrettably, India has failed its WTO challenge and continues to deny consumers' choice and fair market access for Scotch Whisky and other imported spirits. India's discriminatory tariff and tax regime for imported spirits must be reformed in line with international trade rules."

The SWA believes Indian duty on imported spirits is a "blatant violation" of WTO rules and unfairly discriminates against Scotch whisky and other spirits. A bottle of Scotch, for example, can be hit with a tax of up to 550% under the Indian tax regime.

Indian distillers, however, have reportedly claimed the EU is being unfair in threatening WTO action in order to win equal treatment for imported spirits in India.

According to a report in India's Business Standard newspaper today, the All-India Distillers Association has criticised the EU for its threats to take India to the WTO.

The report said the association accused the EU of "double-speak" because under EU law, Indian whisky made from molasses cannot use the word "whisky" on its products on sale in the EU. Any products on sale must be labelled with the term "spirit drink" or "Indian spirit drink".

An SWA spokesman told just-drinks that the EU regulations were in place to "to avoid consumer confusion and unfair competition". He said: "Indian products are already, for example, marketed in this way in Canada."