India-UK trade deal faces tariff dispute as 150% duty demand holds bulk Scotch shipments at ports

Summary

A tariff classification dispute between Indian customs authorities and liquor companies Pernod Ricard and Diageo has left dozens of bulk Scotch whisky containers awaiting clearance at Indian ports. Customs investigators are seeking a 150% import duty, arguing that bulk Scotch concentrates do not qualify for the 75% preferential rate under the India-UK trade agreement, which came into effect in July 2026. The disagreement could affect whisky supplies and the expected benefits of the bilateral trade pact.

Article

Customs authorities challenge preferential tariff on bulk Scotch

India’s customs authorities have detained dozens of containers of bulk Scotch whisky imported by Pernod Ricard and Diageo amid a dispute over the tariff concessions available under the India-UK trade agreement.

According to a Reuters report, investigators are seeking to impose a 150% import duty instead of the 75% preferential rate provided under the agreement. The Directorate of Revenue Intelligence (DRI) maintains that bulk Scotch used in further manufacturing does not qualify as finished whisky under the tariff provisions.

The dispute is emerging as the first major tariff-related disagreement since the India-UK trade agreement came into effect in July 2026.

A confidential DRI memorandum dated 4 November, reviewed by Reuters, reportedly states that bulk Scotch imports should be classified as “compound alcoholic preparations” rather than finished whisky.

Why is India seeking 150% duty on bulk Scotch imports?

The disagreement centres on the classification of bulk Scotch whisky and whether it qualifies for the reduced import duty under the bilateral agreement.

Customs investigators argue that the 75% preferential tariff applies to finished products, including bottled Scotch whisky ready for consumption, rather than concentrates or compounds that undergo further manufacturing in India.

The DRI memorandum stated: “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 agency reportedly warned that incorrect classification could result in recurring revenue losses and instructed customs commissioners to apply the 150% duty.

However, India’s commerce ministry had reportedly assured representatives of the liquor industry on 2 November that the government would honour the trade agreement and work towards resolving the issue. The subsequent DRI memorandum suggests that the matter remains unresolved across government departments.

Pernod Ricard, Diageo and Bacardi shipments face delays

The tariff dispute has affected shipments brought into India by major international spirits companies.

According to Reuters, Pernod Ricard and Diageo each have more than 40 containers held at Indian ports, while Bacardi reportedly has five containers awaiting clearance.

The companies have resisted paying the higher duty, raising concerns about possible disruptions to supplies. Tax authorities have also reportedly searched company offices and questioned executives in recent weeks.

The finance and commerce ministries are discussing a possible resolution, a senior finance ministry source told Reuters.

Bulk Scotch imports play a significant role in India’s whisky industry

Bulk shipments account for approximately 80% of Scotch whisky imported from the UK by volume. These imports are commonly used in the production of Indian-Made Foreign Liquor (IMFL), where Scotch is blended with other spirits and ingredients.

Scotch whisky exports to India were valued at $335 million in 2024. The Scotch Whisky Association estimates that the India-UK trade agreement could increase exports by $1.34 billion over five years.

However, uncertainty over tariff classification could affect the expected gains from the agreement. The International Spirits and Wines Association of India has warned that the dispute risks weakening a key market-access benefit negotiated under the pact.

The issue also brings renewed attention to concerns raised by multinational companies over customs classification practices and retrospective tax demands in India. Similar disputes have previously involved companies such as Samsung and Volkswagen.

FAQs

What is the tariff dispute between India and the UK over Scotch whisky?

Indian customs authorities are seeking a 150% import duty on bulk Scotch whisky, arguing that it should be classified as a compound alcoholic preparation rather than finished whisky. Importers maintain that the shipments should qualify for the 75% preferential tariff under the India-UK trade agreement.

Which companies have shipments held at Indian ports?

Pernod Ricard and Diageo reportedly have more than 40 containers each awaiting clearance. Bacardi has reportedly had five containers held.

Why does bulk Scotch whisky qualify for a different tariff classification?

Customs investigators argue that bulk Scotch concentrates undergo further manufacturing in India and therefore should not receive the preferential tariff applicable to finished whisky products.

When did the India-UK trade agreement come into effect?

The India-UK trade agreement came into effect in July 2026.

How important is bulk Scotch to India’s whisky industry?

Bulk Scotch accounts for approximately 80% of Scotch whisky imports from the UK by volume. It is widely used in the production of Indian-Made Foreign Liquor.