India Scotch tariff dispute hits UK trade pact

India’s first major dispute under its new trade pact with the United Kingdom has emerged over how bulk Scotch whisky imports are taxed. Under the agreement implemented on July 15, India halved import taxes on certain Scotch whisky products from 150% to 75%, with a further reduction to 40% scheduled over 10 years. Indian investigators, however, have told companies that bulk Scotch concentrates do not qualify for the reduced 75% rate and must instead be declared under a customs classification that carries a 150% duty. The issue centres on whether these bulk imports can access the preferential tariff the deal was expected to deliver for “iconic” UK whisky exports.

India’s Directorate of Revenue Intelligence has searched offices of Diageo’s Indian business, United Spirits, and Pernod Ricard in multiple locations as part of an investigation into potential misclassification of imported products. Executives from Pernod have been questioned about Scotch imports, and both companies have said they are cooperating with the authorities. The inquiry focuses on bulk Scotch concentrates shipped in containers and later blended into Indian whisky brands, with inspectors arguing that treaty duty relief does not extend to these products. No official finding or penalty has been announced.

The International Spirits and Wines Association of India, which represents companies including Diageo and Pernod Ricard, has written to India’s commerce minister about the classification dispute. The letter states that excluding bulk Scotch imports from the reduced 75% tariff goes against provisions agreed in the India‑UK trade deal. It warns that the issue “risks undermining, in practice, an important market‑access benefit negotiated and agreed between India and the United Kingdom.” The group also wrote that the preferential tariff treatment negotiated under the pact “could effectively become unavailable” for bulk whisky imports if the current approach continues.

The association maintains that the India‑UK agreement expressly provides preferential tariff treatment for whisky under the relevant tariff lines, which companies interpret as covering concentrates imported from Britain. Industry participants are seeking urgent clarification to ensure the negotiated market‑access benefits are realised while avoiding uncertainty and disruption for legitimate operators. Companies involved believe their bulk imports should receive the new lower tariff rather than the 150% rate now being applied by customs officials.

The tariff dispute comes as India plays a major role in global Scotch whisky trade. India took 53.7 million litres of pure alcohol of Scotch in 2024, making it the industry’s largest market by volume. Bulk shipments therefore dominate Scotch exports to India, and the classification of these imports will determine how much of the headline tariff saving flows to this segment.

Bulk Scotch is used as an input in major Indian whisky brands. Pernod and Diageo import bulk concentrates and mix them with other ingredients to produce popular labels such as Royal Stag, Blenders Pride and McDowell’s. Britain accounts for almost 75% of India’s imported spirits, driven largely by Scotch whisky, underscoring the importance of the new tariff framework for both trading partners. ISWAI’s warning highlights how the investigation and tariff treatment are sending shockwaves through India’s $65 billion alcohol market.

Even after the tariff cut, imported Scotch must still pass India’s food‑safety regime and related conformity checks. Products continue to be sampled and tested, and industry representatives have argued that Scotch should be treated as low risk, noting that they do not believe it needs to be regularly sampled and tested. Previously, they described the federal testing and sampling requirements as unnecessary and costly. The customs classification outcome for bulk concentrates, together with these regulatory procedures, will shape how fully the India‑UK trade deal improves market access for Scotch whisky exporters.