Inspectors are examining whether the two giants misclassified bulk Scotch whisky to pay the lower tariff under the India-UK trade agreement
Indian tax inspectors are investigating whether Diageo and Pernod Ricard, the world's two largest spirits companies, wrongly classified bulk Scotch whisky imports to pay the lower tariff created by the trade agreement between India and the United Kingdom. The probe was revealed by Reuters on Sunday, October 19, based on five industry sources, and partly confirmed by a stock exchange filing from United Spirits, Diageo's Indian arm.
The agreement took effect on July 15 and cut the import duty on some Scotch entering India from 150% to 75%; the rate is set to fall to 40% over the next decade, according to Just Drinks. Both companies bring in concentrated Scotch in bulk, in containers, and blend it with other ingredients to make brands sold in the country, such as Royal Stag, Blenders Pride and McDowell's. According to four people who spoke to Reuters, the inspectors argue that the deal's discount does not apply to this bulk concentrate.
Diageo and Pernod Ricard dominate India's alcoholic beverage market, valued at $65 billion, Reuters says. The United Kingdom accounts for almost 75% of the spirits imported by India, mainly Scotch, according to the credit rating agency Crisil Ratings.
In the week before the report, inspectors made an unannounced visit to Pernod Ricard's Indian headquarters near New Delhi and questioned executives about Scotch imports, according to three people who spoke to Reuters. On Friday, October 16, the Directorate of Revenue Intelligence (DRI) searched United Spirits offices at several locations. In its filing, the company said the action is part of an exercise covering the whole industry, that it had handed over the documents requested and that, for now, there is no effect on its operations; the filing does not say what prompted the searches. Two sources told Reuters that Diageo is also being investigated over how it classifies some of its imports.
Pernod Ricard said it is cooperating with the DRI and providing all the information requested. Diageo said it is cooperating with the authorities and has always complied with local laws. The DRI did not respond to Reuters. So far, there has been no formal charge and no fine announced.
This is not the companies' first clash with Indian tax authorities. Pernod Ricard already faces a $314 million back-tax demand for allegedly undervaluing imports, which it denies, Reuters notes. Import tariff disputes have also involved companies such as Samsung, LG and Volkswagen in the country.
In Brazil, both companies are in Bebidário's catalog with Scotch labels such as Johnnie Walker Black Label, from Diageo, and Chivas Regal 12 Year Old, from Pernod Ricard.
Sources: Reuters (October 19, 2026), Just Drinks (October 20, 2026).
