India's probe into bulk Scotch whisky imports causes anxiety among liquor makers

The investigation initiated by the Indian government regarding imports of bulk Scotch whisky from Britain has shaken the $65 billion market. According to a Business Standard report, the probe has brought focus onto the historic trade agreement between India and UK, which was celebrated after New Delhi agreed to halve tariffs on the products.

This is the first significant dispute over the India-UK Free Trade Agreement since the pact came into effect in July. Following prolonged negotiations, the agreement was implemented on July 15, with whiskey tariffs being a key issue. Under the historic trade pact, India agreed to immediately slash import duties on certain Scotch imports from 150 percent to 75 percent, and to 40 percent over 10 years. The British government stated that iconic UK products including whisky and gin would benefit from India's tariff changes.

Although Indian state taxes and other levies are high and vary across the country, the duty cuts were expected to provide some price relief on whisky products. According to a Reuters report, the Indian government is in private discussions with companies ranging from Diageo and Pernod to Radico Khaitan and Allied Blenders and Distillers over whether their bulk Scotch imports are not eligible for the lower 75 percent tariff.

While imported bottled Scotch like The Glenlivet gets the reduced duty, Indian officials argue that this benefit does not extend to bulk Scotch. Bulk Scotch is often used to make popular whisky brands in India, even though the tariff schedule of the agreement covers Scotch imported in bulk as well.

Tax officials who raided the offices of several companies as part of the probe in recent weeks have claimed that a new customs classification introduced earlier this year for composite alcoholic preparations used for beverage production applies, and the old 150 percent tariff applies to it. Rajneesh Singh, founder of India's Yana Advisors, which advises liquor makers on regulation, has stated that composite alcoholic drinks are essentially flavored or modified alcohol, whereas bulk Scotch whisky is a distilled alcoholic beverage produced with malted barley and water. The Indian government is scheduled to hold meetings with the industry to discuss these issues.

According to the Scotch Whisky Association, India is the largest export market for Scotch whisky in terms of volume, with exports equivalent to more than 22 crore bottles in 2025. But industry estimates show that roughly 80 percent of the volume of Scotch whisky imports from Britain come in bulk form to make popular brands.

Most of these imports go into Indian-made foreign liquor, or IMFL whisky, which is made by blending a little Scotch with other spirits and ingredients. Pernod, Diageo and several Indian companies have popular products made this way. For example, Pernod's Blenders Pride is described on their website as a blend of Indian grain spirits and imported Scotch malts from Chivas Brothers, tailored to the tastes of whisky connoisseurs.

Following a Reuters report last month about the probe into companies in India, a UK government spokesperson said they are working with the Indian government to resolve the issue to ensure UK businesses can export under the tariffs agreed in the trade deal. Scotland leader John Swinney also raised the issue of the treatment of bulk Scotch whisky exports with the Indian government during a visit that ended last week. The Indian government has not commented on the matter so far.

The International Spirits and Wines Association of India, a group representing Pernod, Diageo and other major companies, has stated privately that this classification issue risks undermining the hard-won market-access benefit negotiated between India and the UK. Domestic trade group Confederation of Indian Alcoholic Beverage Companies has also joined the opposition, warning of a blow to domestic production.

Excluding bulk Scotch from the tariff cuts could encourage the import of ready-made whisky rather than domestic production, which goes against India's domestic manufacturing campaign, it stated. Allied Blenders stated in an investor presentation last week that it is one of the largest importers of bulk Scotch and that the UK agreement will improve the reach of its luxury portfolio.