The landmark India-UK trade agreement, which came into effect in July 2026, faces its first significant tariff dispute. Indian customs authorities are demanding a 150% import duty on bulk Scotch whisky shipments, a stark contrast to the 75% tariff rate previously agreed upon under the bilateral pact. This standoff has left dozens of containers, imported by global spirits giants Pernod Ricard and Diageo, detained at Indian ports.
According to a confidential Directorate of Revenue Intelligence (DRI) memorandum, bulk Scotch imports should be classified as “compound alcoholic preparations” rather than finished whisky. Customs investigators argue that the preferential 75% duty applies only to bottled, ready-to-drink Scotch, not the concentrates used for further manufacturing within India.
Why Bulk Scotch Is Crucial for India
Bulk Scotch accounts for approximately 80% of all Scotch whisky imported from Britain by volume. These imports are vital for manufacturing Indian-Made Foreign Liquor (IMFL), which blends Scotch with other spirits and ingredients. The Scotch Whisky Association had estimated that the new trade agreement could boost Scotch exports to India by $1.34 billion over five years, a projection now complicated by the tariff uncertainty.
Major Importers Affected
Pernod Ricard and Diageo each have more than 40 containers of bulk Scotch detained, while Bacardi reportedly has five. These companies have resisted paying the higher tariff, leading to concerns about potential supply disruptions in the Indian market. Tax authorities have also reportedly conducted searches at company offices and questioned executives in recent weeks.
"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 DRI memorandum stated.
While India's commerce ministry reportedly assured liquor industry executives on November 2 that the government would honor the trade agreement and resolve the issue, the subsequent DRI memorandum indicates that differences between government departments persist. Discussions between the finance and commerce ministries are ongoing to find a resolution.
Broader Implications for Trade Relations
This dispute highlights long-standing concerns among multinational companies regarding India's customs classifications and retrospective tax demands, issues that have previously impacted firms like Samsung and Volkswagen. The controversy risks undermining a key market-access benefit negotiated under the India-UK agreement and could set a precedent for future trade interpretations.