E-Malt.com News article: India: Liquor trade group asks government to clarify Scotch tariffs under U.K. trade deal

A trade group representing major liquor companies in India has asked the government for urgent intervention after Indian investigators told importers that reduced tariffs under the new India-United Kingdom trade deal do not apply to bulk shipments of Scotch whisky concentrates, according to a letter reviewed by Reuters.

The dispute centers on one of the most closely watched parts of the trade agreement, which took effect on July 15 after years of negotiations. Under the pact, India agreed to cut import duties on certain Scotch whisky products from 150% to 75% immediately, with the rate set to fall to 40% over 10 years. The British government had said the deal would help flagship U.K. products such as whisky.

But Indian tax investigators have privately told companies that bulk imports of Scotch whisky concentrate should not receive the lower 75% duty and instead must be classified under a customs category that attracts the full 150% tariff, three people with direct knowledge of the matter told Reuters. That position has raised the first major dispute over implementation of the free trade deal and has alarmed companies that rely on imported Scotch spirit for products made and sold in India.

In a letter sent on Friday to India’s commerce minister, the International Spirits and Wines Association of India said the classification issue threatens to undermine a key market access benefit that India and Britain negotiated and agreed under the pact. The group said the preferential tariff treatment could effectively become unavailable for those imports if the current interpretation is maintained.

The association did not comment on the contents of the letter. India’s commerce ministry did not immediately respond to a request for comment.

The issue has become more sensitive after India’s Directorate of Revenue Intelligence searched the offices of Pernod Ricard and Diageo this month and questioned executives as part of an investigation into whether the companies wrongly classified imported products in order to claim the lower tariff rate. Earlier this week, both companies told Reuters they were cooperating with Indian authorities.

Pernod declined to comment further. Diageo did not respond to a request for comment.

The case matters because India is one of the world’s largest alcoholic drinks markets and a crucial growth engine for global spirits companies. The country’s liquor market is worth about $65 billion, and imported spirits remain a small but influential part of the business. According to Crisil Ratings, Britain accounts for nearly 75% of spirits imported into India, driven mainly by Scotch whisky.

For companies such as Pernod and Diageo, the tariff interpretation has commercial importance beyond imported premium bottles sold directly to consumers. Both groups import bulk Scotch concentrates and use them in India to make widely sold brands including Royal Stag, Blenders Pride and McDowell’s. Industry executives say the economics of those products depend heavily on whether the imported spirit qualifies for the lower duty.

People familiar with the matter said the companies believe the goods shipped from the U.K. should fall under the tariff lines covered by the trade agreement and should therefore receive the reduced 75% duty. The industry association made the same argument in its letter, saying the agreement expressly provides preferential tariff treatment for whisky under the relevant customs lines.

The group also warned that uncertainty over classification is already affecting business planning and could disrupt legitimate industry operations unless the government issues a clarification quickly. It said prompt action would help ensure that the market access gains negotiated by India and Britain are actually delivered in practice.

A spokesperson for the British government said London is working with New Delhi to resolve the issue and to make sure British companies can export under the tariff terms set out in the trade deal.

The disagreement comes against a broader backdrop of tension between foreign companies and Indian authorities over import classifications and tax demands. Such disputes have long been a source of concern for overseas investors in India, who have in past years faced large claims for back taxes and penalties. Multinational companies including Samsung and Volkswagen have also been caught in customs and tax fights with the Indian government.

Pernod in particular is already under pressure in India on several fronts. The company, whose largest market by volume is India, is facing antitrust cases and a $314 million tax claim from Indian authorities, who have accused it of undervaluing some imports. Pernod has denied any wrongdoing.

The tariff fight over Scotch is politically sensitive as well because whisky was one of the most difficult issues during the India-U.K. trade talks. India has long maintained some of the highest import duties in the world on alcoholic beverages, and Scotch producers had pressed hard for cuts to improve access to a market with rising incomes and strong demand for premium spirits. The final deal was presented by both governments as a breakthrough, with lower tariffs seen as a concrete commercial win for British exporters.

The current dispute suggests that even after a trade agreement takes effect, the commercial outcome can depend on how customs authorities interpret product categories at the border. In this case, the disagreement is not over whether tariff cuts were negotiated, but over which forms of Scotch whisky are entitled to benefit from them.

That question is especially important for India’s domestic spirits industry because bulk Scotch imports are used as inputs in blended products made inside the country. If those imports remain subject to 150% duties, companies may face higher costs, altered sourcing decisions and pressure on margins in a market where competition is intense. Industry officials say it could also weaken one of the practical benefits that the trade agreement was expected to deliver.

So far, Indian authorities have not publicly explained why bulk Scotch concentrate should be excluded from the lower tariff bracket, and there has been no official clarification from the government on how the relevant customs lines should be interpreted under the trade pact. Until that changes, producers and importers are left facing uncertainty over both future shipments and the potential tax exposure tied to past imports now under investigation.

For Pernod and Diageo, the matter carries both legal and financial risk. Investigators are examining whether the companies’ use of the lower rate was proper, and the answer could determine whether they face additional duty demands. For the wider industry, the case has become a test of whether one of the headline promises of the India-U.K. agreement will hold once it reaches the customs gate.


24 October, 2026