India's Directorate of Revenue Intelligence searched the offices of Pernod Ricard and Diageo this month. Officers questioned executives about how the companies classified bulk Scotch imports, in the first significant dispute over the India-UK free trade agreement1, 2. Investigators have told the companies that the deal's 75% whisky tariff does not cover bulk concentrate. They say it must be declared under a customs classification that attracts 150%1, 4.
Reuters first reported the investigation, citing five industry sources2. The companies say concentrates imported from Britain should get the lower rate1. Diageo's Indian unit, United Spirits, said in a stock exchange filing that offices in several locations were searched as part of an "industry-wide exercise" by authorities2.
What the deal promised
India and Britain signed the agreement on 24 July 2025. It took effect on 15 July 20265. India agreed to halve duty on certain Scotch imports from 150% to 75% immediately, then cut it to 40% over 10 years1, 5. Whisky was a sticking point in the negotiations. The British government said "iconic UK products" such as whisky would gain from the pact1.
The benefit is written for particular customs lines. ISWAI says the agreement "expressly provides preferential tariff treatment for whisky under the relevant tariff lines"1. It fears that if concentrate is assessed under a different line, the negotiated preference "could effectively become unavailable for these imports"1.
Industry asks for a clarification
ISWAI wrote to the commerce minister on Friday1. The letter said the classification issue "risks undermining, in practice, an important market-access benefit negotiated and agreed between India and the United Kingdom"1. It asked for an urgent clarification to keep the benefit "while avoiding uncertainty and disruption for legitimate industry participants"1.
ISWAI declined to comment on the letter. The commerce ministry did not immediately respond to requests for comment, Pernod declined to comment and Diageo did not respond1. The Directorate of Revenue Intelligence did not respond to a request for comment2.
Britain commented for the first time. A spokesperson said: "We are working with the government of India to resolve this issue to ensure UK businesses can export under the tariffs agreed in the trade deal."1
On Saturday, the Scotch Whisky Association said bulk Scotch imports are key to whisky's overall success in India. It said upholding the core principles of the bilateral pact is vital1.
Why most of the trade is affected
About 80% of Scotch whisky exports to India are shipped in bulk. The rest is sold as bottled product3. Exports were worth £286 million in 2025, equal to about 220 million bottles, the Scotch Whisky Association says3. Britain supplies almost 75% of India's imported spirits, mainly Scotch, according to Crisil Ratings. The alcohol market is worth $65 billion1.
Bulk concentrate is blended into Indian brands such as Royal Stag, Blenders Pride and McDowell's1, 4. For bottled-in-origin labels, the duty cut has reached shelves. Retail prices fell 10-15% in Maharashtra, Rajasthan, Goa and Haryana, the Scotch Whisky Association said7.
A line-by-line test for other FTAs
India's trade pacts deliver relief line by line. The India-New Zealand agreement took effect on 20 October. A finance ministry notification set revised basic customs duty and cess rates for listed tariff lines. The rate for a consignment depends on its classification6. Kiwifruit valued at $2.50 per kg or more pays 15% basic customs duty. Apples face 25%, with a minimum CIF value of $1.25 per kg and an annual quota, plus proof of origin6, 8.
The India-UK agreement also sets origin rules, and lets either country raise tariffs again if lower duties cause serious harm5.
What happens next
The investigation is at the stage of searches, documents and questioning, according to the Reuters accounts1, 2. Import tariff disputes in India have often ended in large back-tax demands years after goods cleared. Past cases involved companies including Samsung, LG and Volkswagen2. Pernod also faces a $314 million back-tax demand over alleged undervaluation of imports, which it denies1.
The Scotch Whisky Association has also asked India's food safety regulator to reconsider sampling and testing of imported Scotch, which it says adds a non-tariff barrier7.
ISWAI wants guidance that applies across the industry, not only to the two companies under investigation1. Until that comes, the rate a consignment pays will turn on the line declared at entry.