The government withdrew the additional customs duty on imported wines and spirits, in an effort to resolve a dispute with the European Union and other leading trading partners over high duties on these items.
The EU and the United States had been pressing for a cut to wines and spirits duties which the European bloc said were as high as 550 percent on imported spirits and 264 percent on wines.
India's base import duties on wine and spirits are 100 percent and 150 percent, which are within WTO rules, but some central and state-level taxes push the tariffs over 500 percent.
A finance ministry statement said the government had decided to withdraw the additional customs duty on imported wines, spirits and liquor after discussing the issue with state governments.
But the government raised the basic customs duty on wines from 100 percent to 150 percent, as permitted by the World Trade Organisation, a rate which will continue to apply to spirits and liquors.
A European Union Commission report issued last year found "clear violations of WTO provisions".
Scotch whisky makers had asked the Commission to escalate the dispute after India left wine and spirit duties untouched in its annual budget in February, despite lowering duties on other imports.
EU spirits exports to India in 2005 amounted to 43 million euros (USD 56.4 million), while wine exports stood at just 7 million euros, according to a study by the Centre for European Policy Studies.
Demand for imported wines and spirits is rising in India as a fast-growing economy and higher wages boost the spending power of an expanding middle class.
