India’s reduced tariff on Scotch whisky under the India–UK trade agreement has triggered a dispute over whether bulk whisky imports qualify for the lower duty rate.
A dispute has emerged over the import duty applicable to Scotch whisky in India, with liquor companies seeking the benefit of a reduced 75% tariff under the India–UK trade agreement, while Indian authorities are examining whether bulk Scotch whisky imported for blending into domestic brands qualifies for the preferential rate.
The issue follows the implementation of the India–UK trade agreement, which brought down the import duty on certain Scotch whisky products from 150% to 75%. The agreement provides for further tariff reductions over the coming years.
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However, the lower duty has become a subject of scrutiny as Indian authorities investigate the classification of bulk Scotch whisky imports by major liquor companies, including Diageo and Pernod Ricard.
According to reports, the authorities are examining whether imported bulk whisky has been correctly classified and whether the companies are entitled to claim the reduced tariff.
The investigation has raised questions about the scope of tariff concessions available under the bilateral trade agreement and their application to imported whisky used in the manufacture of products sold in India.
India–UK Trade Agreement at the Centre of the Dispute
The India–UK trade agreement, which came into effect on July 15, 2026, reduced the import duty on eligible Scotch whisky from 150% to 75%. The tariff is scheduled to decline further to 40% over a period of 10 years.
The reduction was intended to improve market access for British alcoholic beverages in India and provide greater certainty to businesses operating under the bilateral trade framework.
The present dispute, however, concerns whether the tariff concession extends to bulk Scotch whisky imported for blending with Indian-made whisky.
Indian authorities reportedly maintain that bulk Scotch whisky concentrates used in domestic manufacturing do not qualify for the reduced duty and should continue to attract the existing 150% rate.
The companies, meanwhile, are seeking clarity on the application of the tariff provisions and the treatment of their imports under the agreement.
Investigation into Whisky Import Classification
The Directorate of Revenue Intelligence (DRI) has reportedly examined the import practices of Diageo and Pernod Ricard as part of the investigation into the classification of bulk Scotch whisky.
The inquiry includes scrutiny of whether the imported products were classified appropriately for customs purposes and whether the companies obtained tariff benefits that were not available to those imports.
Reports indicate that officials conducted searches at company offices and questioned executives in connection with the matter.
Diageo’s Indian subsidiary, United Spirits, has confirmed that authorities conducted searches at multiple locations. Both companies have stated that they are cooperating with the investigation and complying with applicable Indian laws.
The investigation could have implications for the companies’ customs compliance, import costs and eligibility for preferential tariff treatment.
However, the available reports do not establish that the companies have been found guilty of any customs violation. The matter remains under investigation.
Impact on India’s Whisky Industry
India is a major market for alcoholic beverages, and international liquor companies have a significant presence in the country’s whisky segment.
Imported Scotch whisky is also used as an ingredient in products manufactured and marketed domestically. Consequently, the classification of bulk imports and the applicable customs duty can affect the cost structure of liquor manufacturers.
If bulk Scotch whisky is excluded from the reduced tariff, companies using imported whisky for blending could continue to face the higher duty rate.
The distinction between finished imported Scotch whisky and bulk whisky intended for domestic manufacturing has therefore become central to the dispute.
The outcome may also influence how businesses interpret and implement the tariff concessions negotiated under the India–UK trade agreement.
Industry Raises Concerns Over Trade Agreement Benefits
The dispute has also attracted attention from industry representatives concerned about the implementation of the bilateral trade agreement.
The International Spirits and Wines Association of India has reportedly raised concerns that excluding bulk Scotch whisky from the reduced tariff could limit the practical benefits of the agreement for businesses importing whisky for domestic production.
The Scotch Whisky Association has also highlighted the importance of bulk whisky imports to the industry.
The disagreement reflects a broader question about how tariff concessions negotiated between countries should apply to different categories of imported products.
While the agreement provides for reduced duties on eligible Scotch whisky, the current investigation highlights the importance of determining the precise scope of the concession and the customs classification applicable to each import.
What Happens Next?
The investigation is expected to bring greater clarity to the treatment of bulk Scotch whisky imports under India’s customs framework and the India–UK trade agreement.
The key issue is whether bulk whisky imported for blending into Indian-market products can qualify for the reduced tariff or whether such imports remain subject to the higher duty.
The eventual outcome could affect the import costs of liquor companies, their customs compliance practices and the interpretation of preferential tariff provisions.
Until the authorities reach a conclusion, the dispute remains an important test of how the reduced Scotch whisky duty will operate in practice.
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