India-UK trade pact: Pernod, Diageo Scotch imports under tax scanner, says report

Indian tax authorities are reportedly investigating liquor giants Pernod Ricard and Diageo over the classification of bulk Scotch imports. The probe focuses on whether the companies wrongly classified these imports to benefit from lower tariffs under the India-UK trade pact.

The tariff reduction, effective from July 15, cut import duties on certain Scotch imports from 150% to 75%. Tax officials are examining if this relief applies to bulk Scotch concentrates imported in containers and used to produce brands like Royal Stag, Blenders Pride, and McDowell’s, as mentioned in a report in Reuters.

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Last week, tax inspectors visited Pernod Ricard’s India headquarters near New Delhi and questioned executives about Scotch imports. They also reviewed documents related to bulk imports. Diageo’s Indian unit, United Spirits, disclosed that its offices were searched as part of an industry-wide exercise, though the filing did not specify the investigation's focus. Sources told the news agency that Diageo is also under scrutiny for the classification of some Scotch imports.

Both companies stated they are cooperating with authorities. Pernod Ricard is providing all requested information to the Directorate of Revenue Intelligence, while Diageo said it has complied with local laws and submitted necessary documents and clarifications.

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The investigation occurs as India’s $65 billion alcohol market remains important for international liquor firms. The UK accounts for nearly 75% of India’s imported spirits market, mainly driven by Scotch whisky, according to Crisil Ratings.

Pernod Ricard, which considers India its largest market by volume, is also facing antitrust cases and a $314 million back-tax demand over alleged undervaluation of certain imports. The company denies any wrongdoing. Diageo agreed in August to reformulate some drinks after India’s food safety regulator banned them in some states due to flavouring-related violations.

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Import tariff disputes have previously involved foreign companies like Samsung, LG, and Volkswagen, often resulting in substantial back-tax demands years after imports.