The India-UK trade agreement has encountered its first major dispute after liquor makers Diageo and Pernod Ricard revealed that bulk Scotch whisky concentrates are excluded from tariff reductions. Although the pact lowers bottled whisky tariffs from 150 per cent to 75 per cent, the exclusion of bulk imports used for local blending has sparked investigations and industry warnings. Trade associations caution that this loophole threatens the core market-access benefits intended to boost UK spirits in the Indian market.

The India-UK trade agreement has encountered its first major dispute after liquor makers Diageo and Pernod Ricard revealed that bulk Scotch whisky concentrates are excluded from tariff reductions. Although the pact lowers bottled whisky tariffs from 150 per cent to 75 per cent, the exclusion of bulk imports used for local blending has sparked investigations and industry warnings. Trade associations caution that this loophole threatens the core market-access benefits intended to boost UK spirits in the Indian market.

The India-UK trade agreement has encountered its first major dispute after liquor makers Diageo and Pernod Ricard revealed that bulk Scotch whisky concentrates are excluded from tariff reductions. Although the pact lowers bottled whisky tariffs from 150 per cent to 75 per cent, the exclusion of bulk imports used for local blending has sparked investigations and industry warnings. Trade associations caution that this loophole threatens the core market-access benefits intended to boost UK spirits in the Indian market.

The India-UK trade agreement, which took effect on July 15, 2026, hit its first snag after liquor makers Diageo and Pernod Ricard pointed out that bulk Scotch imports remain excluded from the tariff reduction.

A reduction in Whisky tariffs was a key highlight during the years of negotiations between the two countries, as the UK accounts for nearly 75 per cent of India’s imported spirits market, driven by Scotch whisky. Indian import tariffs on Scotch Whiskey sat at a massive 150 per cent, acting as a major trade barrier for UK distillers. However, India ultimately agreed to cut tariffs from 150 per cent to 75 per cent immediately and to 40 per cent over 10 years. The British government expressed their happiness, saying that “iconic UK products” like whiskies could benefit from the pact.

But according to a letter from the International Spirits and Wines Association of India (ISWAI) sent to the commerce minister, companies were privately told that the reduced tariff does not apply to bulk Scotch concentrates.

Creating the first major dispute over the trade agreement, India's Directorate of Revenue Intelligence reportedly searched the offices of Pernod and Diageo this month. The investigation checked for relabeling imported products to benefit from the reduced rate.

The ISWAI letter, accessed by Reuters, questioned the tariff reduction, cautioning the minister that the issue threatens the agreement, “risks undermining, in practice, an important market-access benefit negotiated and agreed between India and the United Kingdom."

It added, "the preferential ​tariff treatment negotiated ... could effectively become unavailable for ‌these imports.”

Global spirits companies like Diageo and Pernod Ricard import massive amounts of bulk Scotch whisky concentrates into India to blend with local spirits and manufacture popular domestic brands like Royal Stag, Blenders Pride and McDowell's. Pernod already faces antitrust cases, with a $314 ‌million back-tax demand from Indian authorities after they were accused of undervaluing imports.

On Saturday, the UK-based Scotch Whisky association told Reuters bulk imports of Scotch are key to whisky’s overall success in India, adding that the industry was "committed to working in partnership with the UK and Indian governments on the smooth implementation of the deal, so its benefits are unlocked.”

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