India’s move to exclude
bulk Scotch imports from a reduced 75% tariff goes against
provisions agreed in an India-UK trade deal, a group
representing liquor makers Diageo and Pernod Ricard wrote in a
letter seen by Reuters.
Whisky tariffs were a sticking point during the years of
protracted negotiations leading up to the deal’s July 15
implementation, though India ultimately agreed to halve import
taxes on certain Scotch imports from 150% to 75% immediately and
to 40% over 10 years.
The British government said “iconic UK products” like
whiskies would benefit from the pact. Indian investigators,
however, have privately told companies the reduced rate does not
apply to bulk Scotch concentrates, creating the first
significant dispute over the free trade agreement since it took
effect.
India’s Directorate of Revenue Intelligence searched the
offices of Pernod and Diageo and questioned
executives this month as part of an investigation into whether
they misclassified imported products to benefit from the reduced
rate.
In a letter to the commerce minister on Friday, the
International Spirits and Wines Association of India (ISWAI)
wrote that the classification issue “risks undermining, in
practice, an important market-access benefit negotiated and
agreed between India and the United Kingdom.”
“The preferential tariff treatment negotiated … could
effectively become unavailable for these imports,” continued the
letter, a copy of which was seen by Reuters.
ISWAI declined to comment on its letter, while India’s
commerce ministry did not immediately respond.
Pernod, which counts India as its biggest market by volume,
declined to comment, and Diageo did not respond to a request for
comment. Both told Reuters earlier this week that they were
cooperating with Indian authorities carrying out the
investigation.
Import tariff disputes have long been a sore point for
foreign investors in India, who have in the past faced demands
for large amounts of back-tax. Such disputes have embroiled the
likes of Samsung and Volkswagen.
Pernod is already facing antitrust cases in India and a $314
million back-tax demand from Indian authorities, who accuse it
of undervaluing some imports. The company denies wrongdoing.
ISWAI’s letter underscores the shockwaves the investigation
has sent through India’s $65 billion alcohol market. Britain
accounts for almost 75% of India’s imported spirits, primarily
driven by Scotch whisky, according to Crisil Ratings.
Indian government inspectors have told companies that they
do not benefit from the reduced 75% tariff on bulk imports of
Scotch concentrates, which must be declared under a customs
classification that attracts a 150% duty, three people with
direct knowledge of the matter told Reuters.
Pernod and Diageo import bulk concentrates, mixing them with
other ingredients to produce hugely popular Indian brands like
Royal Stag, Blenders Pride and McDowell’s.
The three people said companies including Diageo and Pernod
believe concentrates imported from Britain should benefit from
the new, lower tariff. And ISWAI said in its letter that the
India–UK agreement expressly provides preferential tariff
treatment for whisky under the relevant tariff lines.
An urgent clarification could ensure market-access benefits
negotiated by India and Britain are realised “while avoiding
uncertainty and disruption for legitimate industry
participants,” the letter said.
A spokesperson for the British government said: “We are
working with the Government of India to resolve this issue to
ensure UK businesses can export under the tariffs agreed in the
trade deal.”
Published on October 23, 2026
