Indian tax authorities are investigating whether Pernod Ricard and Diageo incorrectly classified bulk Scotch whisky imports to benefit from reduced customs duties under the India–UK trade agreement. The investigation, reported by Reuters on October 19, 2026, involves questions about how the companies declared certain imports after India introduced tariff concessions for qualifying British products. Tax officials reportedly visited Pernod Ricard’s Indian headquarters near New Delhi and questioned executives about its import practices.
Diageo’s Indian subsidiary, United Spirits, separately disclosed that authorities had searched its offices at multiple locations as part of an industry-wide exercise. Sources cited in the reporting said the investigation also covers how Diageo classifies some bulk Scotch imports. Both companies have said they are cooperating with Indian authorities. The probe does not establish wrongdoing, and its outcome will depend on the authorities’ findings and the applicable customs rules. At the centre of the dispute is a tariff reduction that lowered duties on certain Scotch imports from 150% to 75% under the trade agreement that took effect on July 15, 2026.
Key Takeaways
- Investigation: Indian tax authorities are examining how Pernod Ricard and Diageo classified certain bulk Scotch whisky imports.
- Trade agreement: The India–UK Comprehensive Economic and Trade Agreement took effect on July 15, 2026.
- Tariff reduction: Import duties on qualifying Scotch whisky were reduced from 150% to 75%, with further phased reductions towards 40% over 10 years.
- Core dispute: Investigators reportedly question whether the tariff concession applies to the bulk Scotch concentrates involved in the imports.
- Company responses: Pernod Ricard and Diageo say they are cooperating with Indian authorities.
- No finding of guilt: The investigation is ongoing, and the reported scrutiny does not establish that either company breached customs rules.
- Industry impact: The outcome could influence how tariff concessions are applied to imported spirits and how companies structure their supply chains.
Why Are Pernod Ricard and Diageo Under Investigation?
The investigation concerns the classification of bulk Scotch whisky imports and whether those imports qualified for reduced duties under the new India–UK trade framework.
Customs classification determines how imported goods are categorised for regulatory and taxation purposes. The classification can affect the applicable tariff rate, documentation requirements and other import obligations.
According to people familiar with the investigation cited by Reuters, Indian tax officials are examining whether certain bulk Scotch imports were wrongly classified, allowing the companies to claim lower import duties.
Tax inspectors reportedly visited Pernod Ricard’s Indian headquarters near New Delhi during the week preceding the report. They questioned company executives and reviewed documents relating to bulk Scotch imports.
Diageo’s Indian unit, United Spirits, said in a stock exchange filing that authorities had searched offices at multiple locations as part of an industry-wide exercise. The filing did not identify the precise subject of the searches, but sources cited in the Reuters report said Diageo was also being investigated over the classification of certain Scotch imports.
The Directorate of Revenue Intelligence (DRI), which investigates customs-related violations and other revenue offences, is involved in the inquiry.
Neither company has been reported as having received a final determination in this specific investigation. The authorities’ concerns remain allegations under examination rather than established findings.
What Changed Under the India–UK Trade Agreement?
The India–UK Comprehensive Economic and Trade Agreement (CETA) introduced tariff reductions designed to expand bilateral trade and give qualifying British products improved access to the Indian market.
Scotch whisky was among the products expected to benefit. Before the agreement’s tariff concessions took effect, imported whisky faced a customs duty of 150%. Under the agreement, the rate for qualifying Scotch imports was reduced to 75%, with a further phased reduction towards 40% over the following 10 years.
| Trade policy detail | Position |
|---|---|
| Agreement | India–UK Comprehensive Economic and Trade Agreement |
| Effective date | July 15, 2026 |
| Previous Scotch import duty | 150% |
| Initial reduced duty | 75% |
| Longer-term tariff objective | 40% over 10 years |
| Issue under investigation | Classification and eligibility of certain bulk Scotch imports |
The reduced tariff can materially affect the economics of importing whisky into India. Customs duty is calculated under the applicable rules and customs valuation, and a lower rate can reduce the cost associated with bringing qualifying products into the country.
However, the existence of a tariff concession does not automatically mean every product associated with Scotch whisky qualifies for the same treatment. The relevant product classification, origin requirements, customs declarations and terms of the agreement must all be considered.
This is why the current investigation matters: it concerns how the companies declared particular imports and whether the declarations were consistent with the applicable framework.
The Central Dispute: Does the Tariff Relief Cover Bulk Scotch?
Pernod Ricard and Diageo import bulk Scotch whisky or concentrates that can be used in the production of blended spirits in India. These materials may be combined with other ingredients or spirit components to create finished products for the domestic market.
The companies’ business models therefore involve more than importing finished bottles of Scotch whisky and selling them directly to consumers.
According to sources cited by Reuters, tax officials are questioning whether the reduced tariff applies to the bulk concentrates involved in the imports. The reported concern is that the goods may have been classified in a way that allowed the companies to pay lower duties than the authorities believe were applicable.
There is an important counterpoint. UK parliamentary material describing the trade agreement states that the tariff reductions cover both bottled and bulk exports, without a minimum import price threshold. That makes the precise customs classification and interpretation especially important: the investigation cannot be resolved simply by assuming that all bulk imports are excluded.
The authorities will need to assess the relevant product descriptions, tariff codes, origin documentation and terms of the agreement. The companies may also provide supporting documentation to explain why they used particular classifications.
The investigation therefore concerns the treatment of specific imports, not a general finding that bulk Scotch whisky is ineligible for tariff relief.
How the Dispute Could Affect Import Costs
Customs duties are an important part of the cost of imported spirits in India. When the applicable duty falls, importers may benefit from lower landed costs, although the final consumer price also depends on freight, insurance, state-level taxes, distribution costs and commercial pricing decisions.
If authorities determine that particular imports were not eligible for the reduced rate, the companies could face additional customs liabilities for those shipments, depending on the applicable law and the findings of the investigation.
Such a determination could also require changes to future import declarations or sourcing arrangements. Companies may review their customs processes, documentation and internal controls to reduce the risk of similar disputes.
However, the potential financial impact cannot be calculated from the currently reported information. The investigation’s scope, the value of the imports under review and any final duty determination have not been fully disclosed.
It would therefore be premature to assign a specific tax demand or financial penalty to this investigation.
Why India Matters to Pernod Ricard and Diageo
India is a major market for international spirits companies because of its large population, expanding consumer base and established demand for whisky.
Pernod Ricard and Diageo are important participants in the country’s alcoholic beverages industry. Their portfolios include products across several price categories, and both companies rely on complex supply chains to serve Indian consumers.
Pernod Ricard’s business in India includes brands such as Royal Stag and Blenders Pride. Diageo’s Indian operations, through United Spirits, include brands such as McDowell’s.
Bulk imports can be commercially important because they allow companies to source spirit components from different locations and combine them with local production, bottling and distribution capabilities. This can support large-scale manufacturing and help companies serve different market segments.
The companies must nevertheless comply with customs rules, product standards and other regulations governing imported materials and finished beverages.
The investigation could therefore have implications beyond the immediate duty calculation. It may prompt greater scrutiny of how imported spirit components are declared and how the trade agreement is implemented for products that undergo blending or processing before sale.
The Broader Pattern of Customs Scrutiny in India
Import-duty disputes have been a recurring issue for multinational companies operating in India. Authorities may revisit product classifications, customs valuations and declarations when they believe that an importer has not applied the relevant rules correctly.
Such disputes can result in requests for documents, inspections, assessments and, in some cases, demands for additional duties. Companies may contest those assessments through the available legal and administrative processes.
The current investigation is also taking place as India and the UK begin implementing their trade agreement. The deal is intended to improve market access, but businesses still need to understand the detailed conditions governing each product category.
The agreement’s tariff benefits depend on its provisions and the correct application of customs rules. A dispute over classification can therefore become an important test of how the agreement works in practice.
The inquiry does not, by itself, indicate that the trade agreement has failed. It highlights the need for clarity and consistent implementation so that importers and authorities can apply the concessions as intended.
What the Companies Have Said
Pernod Ricard told Reuters that it was cooperating with the Directorate of Revenue Intelligence and providing the information requested. The company said it was committed to addressing questions raised by the authorities.
Diageo also said it was cooperating with Indian authorities and had always complied with local laws. United Spirits’ stock exchange disclosure stated that the company had provided documents and clarifications in response to the searches.
These statements reflect the companies’ positions, but they do not determine the outcome of the investigation. The authorities have not publicly announced a final conclusion in the reporting available as of October 19, 2026.
The next stage may involve further review of customs records, product classifications, import documentation and the specific provisions of the India–UK agreement. Depending on the findings, the matter could be closed without a significant duty assessment or lead to additional proceedings.
Until more information becomes available, the financial and operational consequences remain uncertain.
The Bigger Picture
The investigation into Pernod Ricard and Diageo highlights the importance of customs classification as India implements its trade agreement with the UK. Lower tariffs can create commercial opportunities for British exporters and Indian importers, but companies must still establish that their products qualify under the relevant rules. The dispute over bulk Scotch imports will test how the agreement’s tariff provisions are interpreted and applied in practice.
For international businesses, the case is a reminder that trade agreements do not remove the need for accurate declarations, documentation and compliance controls. For policymakers, clear implementation is essential if tariff concessions are to deliver predictable benefits without creating disputes over product eligibility. The eventual outcome will depend on the authorities’ findings and the applicable legal framework.
Looking Ahead
Indian authorities are expected to continue examining the import declarations and documentation relevant to the investigation. Pernod Ricard and Diageo say they are cooperating, but no final finding has been announced in the reported case. Any additional duty assessment or enforcement action would depend on the outcome of that process and the rules applicable to the imports under review.
The broader significance will become clearer as India and the UK gain more experience implementing their trade agreement. The treatment of bulk Scotch imports could influence customs guidance and compliance practices for spirits companies, while also shaping how businesses assess the practical benefits of the tariff concessions. Until the investigation concludes, the central question remains whether the specific imports met the agreement’s requirements.
Frequently Asked Questions
1. Why are Pernod Ricard and Diageo being investigated in India?
Indian tax authorities are examining whether the companies correctly classified certain bulk Scotch whisky imports and applied reduced customs duties appropriately under the India–UK trade agreement.
2. What is the reduced import duty on qualifying Scotch whisky?
The initial tariff rate for qualifying Scotch imports fell from 150% to 75% when the relevant concessions took effect on July 15, 2026. The agreement provides for further phased reductions towards 40% over 10 years.
3. Does the trade agreement exclude bulk Scotch imports from tariff relief?
The question is disputed in the reported investigation. Tax officials are reportedly examining whether certain bulk imports qualify, while UK parliamentary material describing the agreement says tariff reductions cover both bottled and bulk exports. The treatment of the specific imports under investigation remains to be established.
4. Have Pernod Ricard and Diageo admitted wrongdoing?
No. Both companies have said they are cooperating with Indian authorities. The investigation does not establish that either company violated customs rules.
5. Could the investigation lead to additional tax payments?
Potentially, if authorities determine that the companies applied an incorrect classification or claimed a concession that did not apply to the relevant imports. No final demand or liability specific to this investigation has been confirmed in the available reporting.
6. When did the India–UK trade agreement take effect?
The India–UK Comprehensive Economic and Trade Agreement took effect on July 15, 2026, introducing tariff changes and other provisions intended to expand bilateral trade.
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