India’s liquor industry warns state tax breaks could hand imported spirits a double advantage

India’s main alcohol industry group is asking state governments to remove tax and regulatory breaks for certain imported spirits before the first tariff cuts under the India-UK trade agreement take effect on July 15.

The Confederation of Indian Alcoholic Beverage Companies, or CIABC, said it supports the trade pact and accepts that lower duties on imported spirits will be phased in over 10 years to give local producers time to adjust. But it warned that existing state-level concessions for bottled-in-origin products, combined with lower federal import duties, could leave domestic distillers at a competitive disadvantage.

The group said several states already favor bottled-in-origin labels over Indian-Made Foreign Liquor, or IMFL, through lower excise duties, lower brand registration fees, lower VAT or sales taxes and easier market access. According to CIABC, Delhi, Haryana, Maharashtra, Madhya Pradesh, Odisha, Assam and Kerala all provide some form of concession to bottled-in-origin products compared with Indian-made brands.

CIABC said the concern is especially acute in premium spirits, where imported Scotch can also be used in bottled-in-India products. In that case, lower tariffs on Scotch whisky could help some Indian producers while still putting companies that distill locally under added pressure. The group described the combination of tariff cuts and state incentives as a potential “double advantage” for imported spirits.

In Haryana, CIABC said brand registration fees for IMFL can be as much as 30 times higher than those applied to bottled-in-origin products, while VAT is four times higher. In Assam, it said comparable Indian premium and luxury categories face local excise duties that are between 3.0 and 5.2 times higher than similar bottled-in-origin products.

Anant S. Iyer, director general of CIABC, said state governments should review and withdraw preferential treatment for bottled-in-origin products where it creates what he called a structural disadvantage for Indian-made brands. He said the group is not seeking to restrict consumer choice but wants fair competition among IMFL, bottled-in-India products and bottled-in-origin imports that compete in the same premium segments.

The dispute matters beyond whisky. Changes in customs duties under the India-UK agreement, together with state excise and VAT rules, could alter pricing and market access across India’s imported drinks business. That may affect competition in other premium beverage categories as well, including wine and other imported products that are sensitive to tax differences.

CIABC said bottled-in-origin lines account for 25% of India’s premium-and-above segment, which includes Indian single malts, craft gins, blended whiskies and bottled-in-India Scotches. With imported brands already expanding in that part of the market, the group said neutral tax policy will be important for the future of Indian premium labels.