Indian customs authorities are holding dozens of containers of bulk Scotch whisky imported by Pernod Ricard and Diageo as investigators insist that the shipments attract a 150% import duty, despite assurances from the commerce ministry that the lower tariff under the India-UK trade pact would be honoured.The dispute centres on whether bulk Scotch concentrates used to manufacture whisky brands qualify for the reduced 75% duty introduced under the trade agreement, which came into effect in July.Customs investigators argue that the concession applies only to finished products, such as bottled, ready-to-drink Scotch, and not to concentrates that undergo further processing.Following lobbying by the industry, the commerce ministry assured senior executives on November 2 that India would honour the trade pact and seek an early resolution. The assurance initially led liquor companies, including Pernod Ricard and Diageo, to expect that the lower tariff would be applied.However, a confidential November 4 memo from the finance ministry’s Directorate of Revenue Intelligence (DRI), reviewed by Reuters, instructed customs commissioners across the country to continue applying the higher duty.
Finance ministry memo backs 150% duty
The DRI memo said importers were “incorrectly” claiming benefits under the India-UK trade pact for bulk Scotch shipments. It said the products should attract a 150% tariff under a customs classification introduced on May 1 for “compound alcoholic preparations”.The memo warned that any misclassification had “large-scale, recurring substantial revenue implications” and directed customs officials to ensure the correct application of the higher duty.“Preliminary investigation revealed that the imported goods are not finished whisky/brand/rum as such, but are concentrates/compound preparations which are subjected to further manufacturing,” the memo said.A senior finance ministry source told Reuters that the finance and commerce ministries were discussing an appropriate resolution of the matter.
More than 80 containers of Pernod, Diageo held
The customs dispute has left shipments belonging to the two companies held at Indian ports, with both unwilling to pay the higher duty, according to four people familiar with the matter cited by Reuters.Pernod Ricard and Diageo each have more than 40 containers held at ports, two industry sources said. Bacardi has another five containers on hold, a third source said.The prolonged delays could disrupt supplies, the sources said. In recent weeks, tax officials have also searched the offices of several companies, including Pernod Ricard and Diageo, and questioned executives.About 80% of Scotch whisky imports from Britain by volume arrive in bulk and are subsequently used to manufacture Indian-Made Foreign Liquor (IMFL), which blends smaller quantities of Scotch with other spirits and ingredients.Scotch exports to India were worth $335 million in 2024. The Scotch Whisky Association has estimated that the India-UK trade agreement could increase the value of this trade by $1.34 billion over five years.The International Spirits and Wines Association of India has privately cautioned New Delhi that the dispute “risks undermining, in practice, an important market-access benefit negotiated and agreed between India and the United Kingdom”.Tariff disputes have previously been a source of friction for foreign investors in India, with multinational companies facing demands for substantial back-tax payments. Similar disputes have involved companies such as Samsung and Volkswagen.