India's decision to exclude bulk Scotch imports from the reduced 75% tariff under the India–UK trade deal goes against the provisions agreed in the pact, the International Spirits and Wines Association of India (ISWAI) — which represents liquor makers Diageo and Pernod Ricard — wrote in a letter to the commerce minister on Friday, Reuters reported. The association warned the classification issue 'risks undermining, in practice, an important market-access benefit negotiated and agreed between India and the United Kingdom'.
Whisky tariffs were a sticking point through years of negotiations before the deal took effect on July 15. India agreed to halve import taxes on certain Scotch imports from 150% to 75% immediately, falling to 40% over 10 years, and Britain said 'iconic UK products' like whiskies would benefit. Indian investigators have, however, 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, Reuters reported.
The Directorate of Revenue Intelligence searched the offices of Pernod and Diageo this month and questioned executives as part of an investigation into whether they misclassified imported products to benefit from the reduced rate. Government inspectors have told companies that bulk concentrates must be declared under a customs classification attracting 150% duty, three people with direct knowledge told Reuters. The companies believe concentrates imported from Britain should get the lower tariff, and ISWAI said the agreement expressly provides preferential treatment for whisky under the relevant tariff lines.
ISWAI sought an urgent clarification so the market-access benefits negotiated by India and Britain are realised 'while avoiding uncertainty and disruption for legitimate industry participants'. A British government spokesperson 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.' ISWAI declined to comment on its letter and India's commerce ministry did not immediately respond, Reuters reported.
The stakes are large: Diageo and Pernod dominate India's $65 billion alcohol market — yaani about 65 arab dollars (roughly ₹6 lakh crore) — and Britain accounts for almost 75% of India's imported spirits, mainly Scotch whisky, according to Crisil Ratings cited by Reuters. Both companies import bulk concentrates and mix them locally to produce popular Indian brands including Royal Stag, Blenders Pride and McDowell's. Pernod, which counts India as its biggest market by volume, declined to comment; Diageo did not respond. Both told Reuters earlier this week they were cooperating with the investigation. Pernod is separately facing antitrust cases in India and a $314 million back-tax demand — yaani about 31.4 crore dollars — over alleged undervaluation of imports, which the company denies.