Indian tax officials are investigating Pernod Ricard and Diageo regarding the classification of bulk Scotch whisky imports. The probe seeks to determine if the companies improperly utilized reduced tariff rates intended for finished goods under a recent India-UK trade agreement.
Indian tax authorities have launched an investigation into two of the world's largest liquor companies, Pernod Ricard and Diageo, over their import practices. The inquiry focuses on whether the companies incorrectly classified bulk Scotch whisky concentrates to benefit from lower import duties established under the India-UK trade pact that took effect in July 2026. Under this agreement, India reduced import taxes on certain Scotch products from 150% to 75%.
Tax inspectors have reportedly visited the offices of Pernod Ricard in India to review documentation related to these imports. The central issue is whether bulk concentrates—which are imported in large containers and later mixed with other ingredients to produce popular local brands—qualify for the tariff relief meant for finished, bottled Scotch whisky. Authorities argue that the duty reduction was intended for iconic, finished UK products rather than raw materials used for local manufacturing.
Diageo and Pernod Ricard hold a dominant position in India's massive $65 billion alcohol market. The UK is a primary supplier of spirits to the region, accounting for a significant majority of India's imported spirits market. For the UK, the trade pact was a major win, designed to boost exports of high-value goods like Scotch whisky and gin. However, the current investigation suggests that the practical application of these tariff changes remains a point of contention between multinational corporations and local regulators.
This investigation adds to a growing list of regulatory hurdles for Pernod Ricard in India, which remains its largest market by volume. The company is already navigating separate antitrust cases and a substantial back-tax demand related to allegations of undervaluing imports. Both Pernod Ricard and Diageo have stated they are cooperating with authorities and providing the necessary clarifications regarding their import declarations.
For investors, this story illustrates the complexities of international trade agreements and the risks of regulatory scrutiny in emerging markets. While trade deals often promise lower costs and increased market access, the fine print regarding product classification can lead to significant legal and financial liabilities. Monitoring how these companies resolve these tax disputes is essential for understanding the long-term profitability of their operations in the Indian market.