India's investigation into bulk Scotch whisky imports has triggered concerns across the liquor industry, with major companies including Diageo and Pernod Ricard facing scrutiny over whether their shipments qualify for reduced import duties under the India-UK free trade agreement.
The dispute, the first significant disagreement over the trade pact since its implementation on July 15, centres on the customs classification of Scotch whisky imported in bulk for blending and bottling in India.
Under the agreement, India reduced import duties on qualifying Scotch whisky from 150 per cent to 75 per cent, with further reductions planned to bring the tariff down to 40 per cent over the next decade.
However, customs authorities have questioned whether the concessions apply to bulk Scotch imports used by Indian manufacturers to produce popular whisky brands.
The investigation has raised concerns among international liquor companies and domestic producers about higher import costs, possible tax liabilities and the implications for local manufacturing.
๐๐ถ๐๐ฝ๐๐๐ฒ ๐ผ๐๐ฒ๐ฟ ๐ฐ๐๐๐๐ผ๐บ๐ ๐ฐ๐น๐ฎ๐๐๐ถ๐ณ๐ถ๐ฐ๐ฎ๐๐ถ๐ผ๐ป
The central disagreement concerns whether bulk Scotch whisky should be classified as distilled whisky or as an alcoholic preparation intended for manufacturing beverages.
According to reports, Indian tax authorities have argued that certain bulk imports fall under a customs category introduced earlier this year covering compound alcoholic preparations used in beverage manufacturing.
Products classified under this category attract the earlier 150 per cent import duty rather than the reduced 75 per cent rate available under the trade agreement.
Liquor manufacturers have challenged this interpretation, maintaining that bulk Scotch remains distilled whisky regardless of whether it is imported in bottles or larger containers.
Industry representatives argue that compound alcoholic preparations generally involve modified or flavoured alcohol, while Scotch whisky is a distinct distilled product manufactured under established production standards.
They also maintain that the trade agreement's tariff schedule covers Scotch imported in bulk, making the proposed distinction inconsistent with the concessions negotiated between India and Britain.
๐ ๐ฎ๐ท๐ผ๐ฟ ๐น๐ถ๐พ๐๐ผ๐ฟ ๐ฐ๐ผ๐บ๐ฝ๐ฎ๐ป๐ถ๐ฒ๐ ๐๐ป๐ฑ๐ฒ๐ฟ ๐๐ฐ๐ฟ๐๐๐ถ๐ป๐
The investigation has involved several major liquor manufacturers, including Diageo, Pernod Ricard, Radico Khaitan and Allied Blenders and Distillers.
Tax authorities have examined import-related documents and conducted searches at company premises as part of their scrutiny of customs declarations.
Pernod Ricard said it was cooperating with the Directorate of Revenue Intelligence and providing the information sought by investigators.
Diageo also maintained that it had complied with applicable laws and was cooperating with the authorities.
The investigation has attracted particular attention because both companies have extensive operations in India, where imported Scotch is an important ingredient in several established whisky brands.
Pernod Ricard's Blenders Pride, for instance, combines Indian grain spirits with imported Scotch malts, while other manufacturers use similar blending arrangements across their portfolios.
Any substantial increase in the cost of imported Scotch could therefore affect production expenses, pricing strategies and margins in the Indian whisky market.
๐๐ป๐ฑ๐ถ๐ฎ ๐ฎ ๐ธ๐ฒ๐ ๐บ๐ฎ๐ฟ๐ธ๐ฒ๐ ๐ณ๐ผ๐ฟ ๐ฆ๐ฐ๐ผ๐๐ฐ๐ต
India is the world's largest export market for Scotch whisky by volume, making the outcome of the dispute particularly important for British producers.
According to the Scotch Whisky Association, the equivalent of more than 220 million bottles of Scotch whisky were exported to India in 2025.
Industry estimates suggest that approximately 80 per cent of Scotch imports from Britain arrive in bulk rather than as finished bottled products.
Much of this whisky is subsequently used in Indian-Made Foreign Liquor (IMFL), which combines imported Scotch with locally produced spirits and other ingredients.
This arrangement allows Indian manufacturers to develop whisky brands across different price segments while supporting domestic blending, bottling and distribution operations.
Industry bodies have warned that excluding bulk Scotch from the reduced tariff could create an uneven competitive environment.
Finished bottled Scotch would continue to receive the lower import duty, while Indian manufacturers importing whisky for local processing could face substantially higher costs.
Such a distinction, industry representatives argue, could encourage imports of finished products instead of domestic manufacturing.
๐๐ป๐ฑ๐๐๐๐ฟ๐ ๐ฏ๐ผ๐ฑ๐ถ๐ฒ๐ ๐ฟ๐ฎ๐ถ๐๐ฒ ๐ฐ๐ผ๐ป๐ฐ๐ฒ๐ฟ๐ป๐
The International Spirits and Wines Association of India, which represents several leading international liquor companies, has expressed concerns that the classification dispute could undermine the market-access benefits negotiated under the bilateral trade agreement.
The Confederation of Indian Alcoholic Beverage Companies has also raised objections, warning that higher duties on bulk Scotch could adversely affect domestic producers.
The association has argued that the tariff structure should encourage local value addition rather than make imported finished whisky more competitive than products blended and bottled in India.
The concerns have extended beyond individual companies, with the industry seeking clarity on how customs authorities intend to interpret the provisions of the trade agreement.
๐๐ฟ๐ถ๐๐ฎ๐ถ๐ป, ๐ฆ๐ฐ๐ผ๐๐น๐ฎ๐ป๐ฑ ๐๐ฎ๐ธ๐ฒ ๐๐ฝ ๐ถ๐๐๐๐ฒ
The dispute has also attracted diplomatic attention from Britain, which regards improved access to India's whisky market as an important achievement of the bilateral trade agreement.
The British government has indicated that it is working with Indian authorities to ensure that exporters receive the tariff benefits agreed under the pact.
Scotland's First Minister John Swinney also raised the treatment of bulk Scotch whisky imports with Indian officials during his recent visit.
The issue has become an early test of how the two countries will interpret and implement the agreement's market-access provisions.
๐๐ผ๐๐ ๐๐ถ๐ด๐ป๐ฎ๐น๐ ๐ฝ๐ผ๐๐๐ถ๐ฏ๐น๐ฒ ๐ฟ๐ฒ๐๐ผ๐น๐๐๐ถ๐ผ๐ป
In a significant development on Monday, the Indian government assured liquor industry representatives that it remained committed to honouring the terms of the India-UK trade agreement.
During discussions with industry representatives, officials indicated that bulk Scotch whisky imports were covered by the concessions negotiated under the agreement, according to people familiar with the meeting.
The assurance suggested that the government was moving towards resolving the disagreement over customs classification, although the precise administrative steps needed to settle the matter remained unclear.
The latest development has offered some relief to manufacturers concerned about the prospect of higher import duties.
However, the outcome of the ongoing investigations and the final interpretation of the customs provisions will remain important for companies importing Scotch whisky for blending and bottling in India.
The dispute has also highlighted the importance of consistent customs classifications in implementing trade agreements, particularly when imported raw materials are used extensively in domestic manufacturing.