India threatens a key UK trade deal benefit by seeking 150% duties on bulk Scotch

India’s attempt to deny lower tariffs to some bulk Scotch whisky imports is threatening a key part of the trade agreement it signed with the United Kingdom, according to a letter from an Indian industry group reported by Reuters.

The dispute centers on how Indian customs authorities classify bulk Scotch concentrates imported by major spirits companies, including Diageo and Pernod Ricard. If those products are excluded from the tariff cuts agreed under the UK-India trade deal, importers could face the full 150% duty instead of the reduced 75% rate that took effect in July.

Reuters reported that the International Spirits and Wines Association of India, or ISWAI, wrote to India’s commerce minister to warn that the customs issue “risks undermining, in practice, an important market-access benefit negotiated and agreed between India and the UK.” The group said the “preferential tariff treatment negotiated … could effectively become unavailable for these imports,” according to the report.

The trade agreement between India and the UK came into force in July. Under its terms, India cut import duties on UK whisky from 150% to 75%, with a further reduction to 40% scheduled over the next 10 years. That tariff relief was seen as a major concession in a market that has long been difficult for foreign spirits producers because of high import taxes.

The current dispute appears to focus not on bottled Scotch sold directly to consumers, but on concentrated or bulk Scotch shipped to India for local processing, blending, or bottling. According to Reuters, Indian investigators have privately told companies that those bulk Scotch concentrates do not qualify for the reduced tariff under the trade deal. Instead, authorities say the imports must be declared under a customs category that still carries the full 150% duty.

That interpretation would raise costs for companies that rely on bulk imports as part of their India operations. It would also weaken one of the practical commercial benefits promised by the trade pact, particularly for large multinational distillers with established bottling and distribution businesses in the country.

Earlier this month, India’s Directorate of Revenue Intelligence, or DRI, visited premises linked to Pernod Ricard and to Diageo’s Indian subsidiary as part of the classification inquiry, according to the information cited by Reuters. Allied Blenders & Distillers, a local spirits company, also said last week that tax officials had visited in connection with the import of bulk Scotch into India.

The visits suggest the matter has moved beyond a technical interpretation issue and into an active enforcement stage. Companies now face the possibility that past or current imports could be examined under a stricter classification standard, with direct consequences for duties owed.

The dispute comes at a sensitive time for the broader UK-India commercial relationship. The tariff cut on whisky was one of the most closely watched parts of the bilateral trade deal because it addressed a long-standing complaint from British exporters and Scotch producers. India is one of the world’s largest whisky markets by volume, but high duties have historically limited access for imported premium spirits.

For producers such as Diageo and Pernod Ricard, the classification question matters both because of immediate cost exposure and because India is a strategic growth market. Importing Scotch in bulk can be an important part of managing pricing, supply chains, and local production economics. If those imports are denied the lower tariff, companies could see a sharp increase in landed costs and a narrower benefit from the agreement than they expected when the deal took effect.

ISWAI’s intervention shows concern within the industry that the issue could spread beyond a single customs dispute. The group’s reported warning suggests companies fear that a restrictive interpretation by Indian authorities could, in practice, block the tariff concession for a category of imports that many major players use.

The UK government has said it is engaging with India on the matter. In a statement cited in the report, Britain’s Department for Business and Trade said: “We are working with the government of India to resolve this issue to ensure UK businesses can export under the tariffs agreed in the trade deal.”

That response indicates the issue has become a government-to-government concern, not just a private dispute between importers and customs officials. The question now is whether the two sides can align on how the agreement applies to bulk Scotch products, or whether companies will remain exposed to the higher tariff while the matter is reviewed.

Neither the reported letter nor the comments cited by Reuters indicate that the underlying trade agreement itself is being formally reopened. The immediate issue is how Indian authorities are applying customs classifications under the current regime. But for the companies involved, the effect could be similar to losing a negotiated trade benefit if bulk imports are treated as ineligible.

The investigation also highlights the importance of technical customs definitions in trade deals. Even where governments agree to lower headline tariff rates, the commercial value of that commitment can depend on how specific products are classified at the border. In this case, the difference between treatment at 75% and treatment at 150% is large enough to affect pricing, margins, and import strategy for some of the world’s biggest spirits groups.

Reuters reported that it had seen the ISWAI letter. The news agency said the industry group’s members include Diageo and Pernod Ricard. Requests for comment from ISWAI and India’s commerce ministry were not immediately detailed beyond that reporting. The issue remains under scrutiny as companies, industry bodies, and officials assess whether bulk Scotch imports will receive the same tariff relief that the UK and India agreed to put in place from July.