India-UK Deal Cuts Duty on Eligible Scotch Whisky to 75% Amid Bulk Imports Probe
Key Facts
India's tax authorities are examining whether Pernod Ricard and Diageo wrongly classified some bulk Scotch whisky imports to benefit from lower duties under the trade deal with Britain, Reuters reported. The investigation puts the implementation of the tariff cut to the test after the deal took effect on 15 July 2026. The UK Department for Business and Trade says the deal cut the duty on eligible Scotch whisky from 150% to 75% when it came into force. The agreed schedule provides for a further gradual reduction to 40% over the following ten years. The dispute centers on whether eligible bulk shipments qualify for the cut or are classified as concentrates, which are not covered by the exemption.
Reuters reported that tax inspectors visited Pernod Ricard's Indian headquarters near New Delhi and questioned executives about Scotch whisky imports. United Spirits, Diageo's Indian subsidiary, also said in a stock exchange filing that its offices at multiple locations were inspected on Friday as part of an industry-wide operation. The filing said the authorities conducted the operation as an "industry-wide action." Reuters quoted a source as saying the department's concerns relate to the misclassification of imports. The companies did not respond to Reuters' requests for comment on the investigations and inspections.
The impact of the dispute depends on the volume of bulk imports and their use in manufacturing in India. Reuters said about 80% of Scotch whisky imports from Britain, by volume, arrive in bulk. These imports are often used to produce Indian blended whisky made from Scotch whisky and other drinks and ingredients. The value of bulk Scotch whisky imports from Britain to India rose to $12.39 million in August 2026, according to trade data cited by Moneycontrol. The quantity imported in containers exceeding two litres also reached 2.5 million in August, compared with 320,454 a year earlier, the report said.
August data show that bulk imports have become a significant part of the flow of Scotch whisky into India following the deal's start, making the interpretation of classification rules important for importers and domestic drinks manufacturers. The Confederation of Indian Alcoholic Beverage Companies warned that excluding bulk imports from the cut could harm domestic manufacturing, Reuters reported. The confederation said this could encourage imports of finished products instead of bringing in bulk whisky for use in domestic production. The objection reflects the impact of tariffs on sourcing and manufacturing, as well as their cost to importers. The customs treatment remains tied to the authorities' decision on whether bulk imports qualify for the reduction.
On 2 November, India's trade ministry said it was working to resolve uncertainty over the customs classification of bulk Scotch whisky imports while protecting the benefits of the deal. Reuters quoted a government source as saying bulk imports are already covered by the trade concessions. A second official added that steps would be taken to prevent the tariff cut from being undermined. The comments come amid objections from domestic and foreign companies to an investigation into bulk whisky imports, after Reuters reported on a confidential letter dated 27 October concerning government talks with drinks companies. The ministry, meanwhile, said work to address the classification uncertainty was ongoing, without resolving the outcome of the investigation in the available material.
The case has commercial significance given that Scotch whisky exports to India reached $335 million in 2024, Reuters reported. The Scotch Whisky Association forecast that the deal would increase the value of trade by $1.34 billion over five years. That forecast places the tariff cuts within a broader effort to boost trade, while the investigation tests how the reduction is applied to bulk shipments used in domestic production. Britain had set out a phased duty reduction, starting at 75% and targeting 40% over the following ten years. The companies did not respond to Reuters' requests for comment on the investigation, while India's trade ministry said it was working to address the classification uncertainty.