When the India-UK free trade agreement took effect in July, the headline number was simple: duty on Scotch whisky would fall from 150% to 75% immediately, then to 40% over ten years. Four months later, the deal’s first serious argument is about a narrower question — what, exactly, counts as Scotch?
India’s tax authorities are examining whether Diageo and Pernod Ricard, two of the world’s largest spirits companies, misclassified some bulk Scotch imports to claim the lower tariff, Reuters reported on 23 October, citing people familiar with the matter. Investigators argue that bulk concentrate — whisky shipped in tankers and later blended or bottled in India — should still attract the old 150% rate.
Two tariff lines, one gap
Bottled-in-origin Scotch and bulk concentrate sit in different tariff lines. The FTA cut the first. The second was meant to stay outside the concession, according to the companies’ reading of the agreement. The dispute turns on how shipments were declared, and on whether concentrate that is later bottled in India was being treated as bottled-in-origin.
The gap is money. At 150%, bulk concentrate does not benefit from the deal at all.
Why both sides care
- Bulk imports keep Indian bottling plants and their jobs running, and give blenders room on price.
- Bottled imports protect Scottish distilleries and the provenance premium that comes with the word “Scotch”.
- A 75-percentage-point difference between the two rates is a strong incentive to argue about classification.
The trade group’s warning
The International Spirits and Wines Association of India, which represents large importers, wrote to officials arguing that excluding bulk Scotch from the reduced rate “risks undermining” the benefits negotiated in the pact, Reuters reported. The group’s point is procedural as much as commercial: if the concession is narrower in practice than it looks on paper, the deal’s value to UK exporters shrinks.
Testing adds friction
Bulk consignments also face FSSAI laboratory testing and customs scrutiny, which can hold up shipments even after duty is settled. For an importer, the combined effect is uncertainty about landed cost — the number that ultimately decides retail price.
What happens next
The immediate question is whether the tax demands are enforced, and whether the companies contest them. Beyond that, the case sets a marker for how India reads its own tariff schedules under the FTA — and for UK exporters who assumed the headline cut applied to everything they ship.
For drinkers, the near-term effect is likely to be modest. A 75% customs duty is still steep, and state excise duties sit on top of it. For the trade agreement, though, the Scotch case is the first real test of whether its fine print holds under pressure.
