India UK Trade Pact Whisky Dispute: Official Probe Into Pernod, Diageo

The India UK trade pact whisky dispute has escalated on two fronts at once, with Indian tax officials now probing Pernod Ricard and Diageo over alleged tariff misuse while a separate clash over UK steel curbs has India threatening to roll back the same Scotch duty cuts entirely.

What Is the India UK Trade Pact Whisky Dispute Actually About?

The India UK trade pact whisky dispute isn’t one dispute, it’s two separate ones that both happen to threaten the same Scotch whisky tariff cuts agreed under the countries’ free trade agreement.

The first is a tax classification probe into how two global liquor giants used the new lower duty rate. The second is an unrelated diplomatic standoff over UK steel import restrictions, where India is now using the whisky tariff concessions as a bargaining chip. Both are unfolding at the same time, which is why recent coverage of this topic can look confusing if you don’t separate the two threads.

What Triggered India’s Tax Probe Into Pernod Ricard and Diageo?

According to Reuters’ reporting, India’s Directorate of Revenue Intelligence is investigating whether Pernod Ricard and Diageo misclassified bulk Scotch concentrate imports to wrongly qualify for the lower 75% tariff rate meant for finished Scotch whisky.

Officials are specifically examining bulk Scotch concentrate brought in by the container and blended locally into Indian-made brands like Royal Stag, Blenders Pride, and McDowell’s, rather than bottled Scotch imported for direct sale. Tax inspectors made an unannounced visit to Pernod Ricard’s India headquarters near New Delhi, questioning executives about its import practices. Diageo’s Indian arm, United Spirits, separately disclosed that its offices were searched as part of what it described as an industry-wide exercise, though it didn’t specify the investigation’s exact focus.

How Did the India UK Whisky Tariff Cuts Work in the First Place?

Under the India-UK free trade agreement, India’s import duty on UK whisky and gin dropped from 150% to 75% once the tariff cuts took effect on July 15, 2026, with a further reduction to 40% scheduled over the agreement’s first ten years.

Notably, the deal does not include a minimum import price requirement on Scotch, something India’s domestic liquor industry had actually pushed for as protection. That absence is part of why bulk-import classification has become such a sensitive issue, since even a small gap in how “Scotch” is defined for customs purposes can translate into a large tax difference at this kind of volume.

Why Is the UK Steel Dispute Also Threatening the Whisky Tariff Cuts?

Separately from the tax probe, India has warned it may reconsider the tariff concessions it gave Britain, including on Scotch whisky, if the UK doesn’t address concerns about new steel safeguard measures.

The UK’s steel restrictions, which cut duty-free import quotas and impose a steep tariff on shipments above that quota, took effect from July 1, 2026, and India has joined Brazil, Turkey, Japan, South Korea, Switzerland, and Australia in raising objections at the World Trade Organization. An Indian trade official was quoted saying that if Britain doesn’t treat the free trade agreement as leverage to resolve the steel issue, India could reconsider the concessions it offered, a clear signal that whisky tariffs could become a pressure point in an entirely different trade fight. A UK official has reportedly characterized the steel measures as a separate matter from the FTA itself.

How Have Pernod Ricard and Diageo Responded to the Probe?

Both companies say they are cooperating fully with Indian authorities, and neither has been formally charged or had any tax demand confirmed as of the latest reporting.

It’s worth noting that import tariff classification disputes like this one often take years to resolve and frequently end with large retroactive tax demands rather than quick settlements, so this is very much an early-stage inquiry rather than a concluded case. For more business and trade policy coverage, check out our Business section.

Frequently Asked Questions

What is the current import duty on Scotch whisky in India?
As of the trade pact’s July 15, 2026 implementation, the duty on UK whisky and gin is 75%, down from 150%, with a scheduled reduction to 40% over the next decade.

Which Indian-made brands are connected to the bulk Scotch import probe?
Reports name brands such as Royal Stag, Blenders Pride, and McDowell’s as products made using bulk Scotch concentrate imported by the companies under investigation.

Is the India-UK free trade agreement itself at risk of being cancelled?
No, there’s no indication either dispute threatens the FTA’s existence, the current friction is over specific tariff classifications and concessions, not the broader agreement being scrapped.

Has India actually rolled back any Scotch whisky tariff concessions yet?
No, as of the latest reporting this remains a stated warning tied to the separate UK steel dispute, not an action India has taken.