Settling the dispute could take between 12-18 months, another ministry source who deals directly with WTO issues told Reuters.
New Delhi says it wants to solve the dispute "amicably" but there has been no breakthrough so far between India and its largest trading partner.
"As far as we are concerned, it's a violation of TRIPS and needs to be taken to the WTO," the senior trade ministry source said, referring to the international trade agreements.
"Pharma issue will go to the WTO. India is not satisfied by what is happening in the European Union," the source added.
A formal trade dispute has loomed for a long time between India and Brazil on one side and the EU on the other.
Developing countries believe the case, originally involving the seizure by Dutch customs of a blood pressure drug en route from India to Brazil, is a symbol of their mistreatment by rich nations and corporations.
According to WTO procedure, the case now moves to the dispute settlement mechanism of the WTO for a solution.
India has said the drug shipments were consistent with WTO regulations. The issue is sensitive in a country with a thriving generic drugs industry with hundreds of millions of poor needing access to cheap medicine.
The move comes despite an earlier statement by the European Commission that the EU had taken the drugs seizures "very seriously" and implemented measures to prevent further incidents.
"We take this positively," P.V. Appaji, executive director of India's Pharmaceuticals Export Promotion Council, told Reuters.
"They (the drugs) are going to countries where they have approved the products for imports. That is clear. This is just denying access to generic medicines of affordable prices to the developing world."
Global demand for generic drugs from Indian drugmakers such as Dr Reddy's Laboratories, Ranbaxy Laboratories and Cipla Ltd is booming as nations battle rising health care costs.
The Indian generics business boom has lured Western drugmakers that want to raise exposure in fast-growing emerging markets.
"It is about time. This should have been taken up a long time ago," Amar Lulla, the joint managing director of Indian generics maker Cipla, told Reuters of the dispute.
"Everybody is playing into the hands of the multinationals. This is high-handedness. Goods are in transit, how can they be confiscated?" (Reuters)
