India-UK trade deal hits tariff hurdle: Customs seeks 150% duty on bulk Scotch, shipments held at ports

India's customs authorities have detained dozens of containers of bulk Scotch whisky imported by Pernod Ricard and Diageo amid a dispute over tariffs under the India-UK trade agreement. Investigators are seeking a 150% import duty, arguing that bulk Scotch used in whisky production does not qualify for the reduced 75% tariff promised under the pact, Reuters reported.

The disagreement marks the first major trade dispute linked to the India-UK agreement, which came into effect in July 2026.

According to a confidential Directorate of Revenue Intelligence (DRI) memorandum dated November 4, reviewed by Reuters, bulk Scotch imports should be classified as "compound alcoholic preparations" rather than finished whisky.

Why is customs demanding 150% duty?

The dispute centres on whether bulk Scotch concentrates qualify for preferential tariffs under the bilateral trade agreement.

Customs investigators argue that the reduced 75% duty applies only to finished products, including bottled, ready-to-drink Scotch whisky.

"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 memorandum stated.

The DRI warned that incorrect classification could have substantial recurring revenue implications and directed customs commissioners to apply the 150% duty.

However, India's commerce ministry reportedly assured liquor industry executives on November 2 that the government would honour the trade agreement and resolve the dispute.

The subsequent DRI memorandum indicates that differences between government departments remain unresolved.

Pernod Ricard, Diageo shipments stuck

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

The companies have resisted paying the higher tariff, raising concerns about potential supply disruptions.

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.

Why does bulk Scotch matter for India?

Bulk shipments account for approximately 80% of Scotch whisky imported from Britain by volume.

These imports are commonly used to manufacture Indian-Made Foreign Liquor, which blends Scotch with other spirits and ingredients.

Scotch exports to India totalled $335 million in 2024. The Scotch Whisky Association estimates that the bilateral agreement could increase exports by $1.34 billion over five years.

However, uncertainty over tariff classification could complicate those projections.

The International Spirits and Wines Association of India has warned that the dispute risks undermining a key market-access benefit negotiated under the agreement.

The controversy also highlights longstanding concerns among multinational companies about India's customs classifications and retrospective tax demands.

Similar disputes have previously involved Samsung and Volkswagen.