India's Scotch probe of Diageo, Pernod undermines UK pact benefits: ISWAI

India's decision to exclude bulk Scotch imports from a reduced 75% tariff conflicts with provisions from their India-UK trade deal, according to a letter seen by Reuters. Scotch tariffs were a contentious issue during the lengthy negotiations leading up to the trade deal's implementation on July 15, although India eventually agreed to cut import taxes on certain Scotch imports from 150% to 75% immediately and to 40% over a decade.

British officials had touted the pact as beneficial for iconic UK products like whiskies. However, Indian investigators have privately informed companies that the reduced rate does not apply to bulk Scotch concentrates, marking the first major dispute over the free trade agreement since it began. The Directorate of Revenue Intelligence recently searched the offices of Pernod and Diageo, questioning executives as part of an investigation into potential misclassification of imported products to take advantage of the reduced rate.

In a letter to the Indian commerce minister, the International Spirits and Wines Association of India (ISWAI) warned that this classification issue could undermine the important market-access benefits agreed upon between India and the United Kingdom. The letter stated that if the preferential tariff treatment becomes unavailable for these imports, the arrangement could be rendered ineffective.

Both Pernod, which is India's largest spirits market by volume, and Diageo, Diageo's response was not immediately available.