India investigates bulk Scotch whisky imports under trade pact dispute
A customs classification dispute over bulk Scotch imports is challenging the implementation of the India-UK free trade agreement.
The Indian government is investigating bulk Scotch whisky imports, a move that has impacted a $65 billion market, according to reports from BusinessLine and Business Standard. The probe follows the July 15 implementation of a trade pact between India and the UK, which included a commitment to reduce import taxes on certain Scotch products from 150 per cent to 75 per cent immediately, and to 40 per cent over 10 years.
Indian officials are privately arguing with companies including Diageo, Pernod, Radico Khaitan, and Allied Blenders and Distillers that bulk Scotch imports do not qualify for the lower 75 per cent tariff. While bottled Scotch receives the reduced duty, officials claim bulk imports should fall under a new customs classification for alcoholic preparations used to make beverages, which carries the original 150 per cent tax.
Rajnish Singh, founder of Yaana Advisors, stated that compound alcoholic beverages are flavoured or modified alcohols, whereas bulk Scotch is a distilled beverage made from water and malted barley. The International Spirits & Wines Association of India has noted that this classification issue could undermine market-access benefits negotiated in the trade deal.
Industry estimates suggest that approximately 80 per cent of Scotch whisky imported from Britain by volume arrives in bulk to be used in Indian-Made Foreign Liquor (IMFL). The Confederation of Indian Alcoholic Beverage Companies said that excluding bulk Scotch from the tariff cut could encourage finished whisky imports over local production.
A spokesperson for the UK government said they are working with India to resolve the issue so UK businesses can export under the agreed tariffs. The Indian government is expected to hold talks with the industry to discuss the matter.