India Investigates Diageo and Pernod Ricard Over Scotch Import Classifications

Indian tax officials are examining whether some bulk Scotch whisky imports by Pernod Ricard and Diageo were classified in a way that allowed them to receive lower customs duties under the new trade pact between India and the United Kingdom, according to five industry sources familiar with the matter.

The inquiry does not amount to a new tariff increase, and it does not establish any violation by either company. Instead, it centers on which types of Scotch imports qualify for the reduced duty that took effect after the bilateral trade agreement came into force on July 15, 2026. For eligible imports, the tariff fell to 75% from 150%, a gap of 75 percentage points. That is a 50% cut in the duty rate for qualifying shipments, not a 50% drop in the final consumer price.

The investigation matters because Pernod and Diageo are major suppliers in India’s liquor market and both import Scotch used in products blended and sold locally. If Indian authorities decide that some bulk imports or concentrated forms of Scotch do not qualify for the lower rate, that could raise import costs for those inputs and affect pricing and margins in one of the world’s most important spirits markets.

According to three of the sources, officers from India’s Directorate of Revenue Intelligence visited Pernod’s India headquarters near New Delhi last week and questioned executives about Scotch imports. The Directorate of Revenue Intelligence, known as the DRI, is the Indian agency responsible for tackling smuggling, international commercial fraud, and customs duty evasion.

Diageo’s Indian unit, United Spirits, said in a stock exchange filing last week that authorities searched its offices in several locations on Friday as part of what it described as an industry-wide exercise. The filing did not specify the subject of the searches. Two of the sources said Diageo is also being investigated over the classification of some Scotch imports.

The central issue, according to four of the people familiar with the matter, is whether duty relief under the India-UK agreement applies to bulk Scotch concentrates brought into India in containers and later blended with other ingredients for locally sold brands. One source said officials are concerned that some bulk imports may have been classified in a way that made them eligible for the lower tariff when, in the authorities’ view, they may not qualify.

Neither company has been accused publicly of wrongdoing, and no new tax demand has been quantified in connection with this inquiry.

Pernod Ricard said it is cooperating with the DRI and supplying the information requested. The French group, based in Paris, said it is committed to addressing any questions from the authorities. Pernod is one of the world’s largest wine and spirits producers and sells brands in about 160 countries.

Diageo also said it is cooperating with Indian authorities and has always complied with local laws. In its exchange filing, United Spirits said it had provided documents and clarifications to officials. Diageo, based in London, describes itself as the world’s largest international spirits company and says it distributes products in around 180 countries.

The Indian revenue intelligence agency did not respond to a request for comment.

The case adds to a long line of tariff and customs disputes in India involving multinational companies. Foreign businesses have often complained that classification and valuation cases can remain open for years and later lead to large back-tax demands. Indian officials have said they are enforcing the law and protecting revenue.

For spirits companies, the question carries unusual weight because India is a vast and fast-growing alcohol market. Pernod Ricard and Diageo are major players in the country’s estimated $65 billion liquor industry. Both rely on imported Scotch for premium and semi-premium products sold in India, including local blends that use Scotch as a component.

Industry researchers have pointed to the importance of the UK in India’s imported spirits market. Crisil Ratings said this year that the UK accounts for almost 75% of India’s imported spirits segment, largely because of Scotch whisky. That makes the scope of the new tariff concession especially important for importers, distributors, and domestic bottlers.

When the trade pact took effect in July, the British government said iconic UK products, including whisky and gin, would benefit from India’s tariff changes. It also said UK whisky exports to India were worth more than £200 million in 2022. The current inquiry does not challenge the existence of that concession. It questions how broadly the reduced duty should be applied, especially to bulk or concentrated imports that are later used in local manufacturing.

One person familiar with the visit to Pernod’s office said inspectors reviewed documents related to bulk Scotch imports during their time at the company’s India headquarters and had not made further contact after that visit. The source described the action as focused on customs treatment under the new trade framework rather than on any announced penalty.

The probe comes at a sensitive time for both groups in India. Pernod is already dealing with antitrust matters in the country, which is its largest market by volume, and it is contesting a separate $314 million back-tax demand linked to allegations that some imports were undervalued. The company has denied wrongdoing in that case. Diageo, meanwhile, agreed in August to reformulate some of its best-known drinks after India’s food safety regulator banned them in some states over the use of flavoring that authorities said violated local rules.

Because no value or volume figures have been made public for the Scotch imports under review, it is not yet possible to estimate the financial impact of the current investigation. Much will depend on how Indian officials interpret the customs classification rules under the new agreement and whether that interpretation extends across the industry or only to specific import categories and shipments.