Govt assures liquor makers it will honour scotch import commitments
The government has assured domestic liquor makers that the ambiguity over the customs classification of bulk Scotch whisky imports will be resolved amicably, three people aware of the matter said. The development came after the Union commerce secretary met industry representatives from the International Spirits & Wines Association of India (ISWAI) and the Confederation of Indian Alcoholic Beverage Companies (CIABC) on Monday.
The dispute centres on how bulk Scotch whisky imported into India should be classified for customs purposes. Under the FTA, import duty on eligible Scotch whisky fell from 150% to 75%, with a gradual reduction to 40% over 10 years. The industry argues that bulk Scotch, which is imported in large quantities and bottled here -- should also qualify for the lower rate because it remains Scotch whisky, irrespective of how it is shipped. However, local tax authorities are exploring whether certain bulk imports should fall under a different Harmonized System of Nomenclature (HSN) classification that attracts the higher duty. The HSN code determines how an imported product is classified for customs purposes and, consequently, the duty payable.
Industry officials were informed that the government would honour its commitments under the India-UK free trade agreement (FTA), including on imports of bulk Scotch which came into effect 15 July, the people cited above said on the condition of anonymity.
“The ministry's commitment to honour FTA obligations, while safeguarding the interests of domestic alcobev industry, gives the sector the confidence it needs. We look forward to an early resolution that ensures business continuity," said CIABC director-general Anant S Iyer.
Queries sent to ISWAI and the commerce ministry went unanswered.
The industry bodies had earlier sought clarity from the commerce ministry on the customs classification of bulk Scotch whisky imports, a dispute that would limit the benefits of the FTA.
Meanwhile, lower import duties have started supporting margins for some companies.
Amar Sinha, managing director of Allied Blenders & Distillers Ltd, said the agreement could end up benefiting imported Scotch brands more than Indian liquor manufacturers if bulk imports are excluded from the duty concession. “Nearly 80% of Scotch whisky imported into India arrives in bulk and is bottled locally, while only about 20% comes in finished bottles. Together, bottled-in-India and bottled-in-origin Scotch account for roughly 10 million cases in the country,” Sinha said.
Under the current arrangement, all foreign companies import whisky from Scotland in large containers, bottle it at Indian facilities as well as mix it to make IMFL or Indian manufactured foreign liquor and sell it in the domestic market. But lower duties could make it cheaper to import fully bottled Scotch rather than bring in bulk spirit for local bottling.
“This could hurt domestic bottling operations and undermine the government's Make in India push,” Sinha said. Indian spirits makers frequently utilize vatted spirits and blending techniques to make premium whisky products. A potential 150% duty could then erase the impact of the FTA and could also lead to more inferior imported brands coming into India, he added.
In recent earnings calls, United Spirits Ltd, maker of McDowell's, Allied Blenders, maker of Officer's Choice, and Radico Khaitan Ltd said the tariff reduction had begun supporting gross margins to some extent. Allied Blenders estimated a 70-basis-point benefit for FY27, while Diageo-owned United Spirits said it had seen a benefit but did not quantify it. Tilaknagar Industries, though, said it had not received any benefit in the September quarter as it was still holding inventory.
The DRI has told companies that bulk Scotch concentrates should be declared under a customs classification attracting the higher 150% duty, according to a recent Reuters report. Companies have opposed this interpretation. DRI officials have searched multiple locations linked to these companies in October.
United Spirits chief financial officer Pradeep Jain in the company’s Q2 earnings call last week said it had classified its Scotch imports under the same HSN code for the past 15-20 years and was confident about its position. Similarly, Radico Khaitan executive director and CFO Dilip Banthiya similarly said the company had used the same code for 10-20 years and had not changed the code or description of the material after 15 July.
For United Spirits, the tariff reduction has already begun to feed into its numbers. Jain said all the company's consignments had been cleared at concessional rates since 15 July, and that the FTA, along with a favourable product mix, had supported sequential gross-margin expansion in the September quarter. He declined to quantify the contribution .
The country's whisky consumption grew 3.7% to 268.8 million nine-litre cases in 2025, while Scotch grew faster, up 5.3% to 9 million cases. Scotch is expected to grow at a 5.4% CAGR till 2030, against 3.6% for whisky overall, according to data from drinks consultancy IWSR, accessed by Mint.