India Probing Pernod, Diageo Scotch Imports Under India-UK Trade Pact

3-line summary

• Indian tax authorities are investigating whether Pernod Ricard and Diageo misclassified some bulk Scotch whisky imports to obtain lower tariffs, Reuters reported, citing sources; authorities contend the tariff reduction under the India-UK trade pact, which took effect July 15 and cut duty on certain Scotch imports to 75% from 150%, does not apply to bulk concentrates, which both companies import in containers to make brands such as Royal Stag, Blenders Pride, and McDowell's.
• Tax inspectors made an unannounced visit to Pernod Ricard's India headquarters near New Delhi last Thursday to question executives, and the company said it is cooperating with the Directorate of Revenue Intelligence; Diageo's Indian unit United Spirits disclosed in an exchange filing that multiple offices were searched last Friday as part of an 'industry-wide action,' saying it has submitted documents and complied with local laws. Both companies deny wrongdoing.
• India's roughly $65 billion liquor market is led by the two companies, with the UK accounting for about 75% of India's imported-spirits market per Crisil Ratings; the UK exported more than 200 million pounds of whisky to India in 2022. Pernod Ricard separately faces a $314 million back-tax demand over alleged underreporting, which it denies; the companies' tax disputes echo similar cases India has pursued against foreign firms including Samsung, LG, and Volkswagen.

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