Scotch imports by Pernod Ricard, Diageo under tax probe - How is it linked to India-UK trade deal? All you need to know

Indian tax authorities are examining whether Pernod Ricard and Diageo correctly classified certain bulk Scotch imports to claim a lower customs duty under the India-UK trade agreement. Reuters first reported the probe. Officials are assessing whether the reduced rate, which took effect on July 15, extends to bulk concentrates brought in containers and later blended with other ingredients to produce brands such as Royal Stag, Blenders Pride and McDowell's.

The two companies control a large share of India's $65 billion alcohol market. Under the pact, India cut import tax on specified Scotch imports from 150% to 75%. Tax inspectors contend the relief does not cover bulk concentrates and are concerned these shipments are being placed in the wrong category. The UK supplies close to three-quarters of India's imported spirits, largely Scotch, according to Crisil Ratings. The British government said in July that whiskies and gin would gain from the tariff changes, noting UK whisky exports to India exceeded £200 million in 2022.

Why it matters for business

The case turns on tariff classification, a compliance area where an incorrect code can trigger duty demands, interest and penalties even when the goods themselves are lawful. For importers using concentrates rather than bottled Scotch, the eligibility of the reduced rate is now a live question. The scrutiny adds to existing exposure for Pernod Ricard, which faces antitrust matters in India and a $314 million back-tax dispute over alleged undervaluation of Scotch whisky; total penalties could cross $600 million. Separately, Diageo agreed in August to reformulate some popular drinks after the food safety regulator FSSAI banned them in certain states for adding flavours that regulations do not permit. FSSAI said tests found some Diageo and Inbrew plants added flavours of the beverage itself, such as rum flavour to rum, a practice it said has no international manufacturing basis and could bypass maturation …