India’s commerce ministry says it will work with the finance ministry to settle how bulk Scotch imports are classified, a decision that could affect liquor makers’ costs and access to lower tariffs.
India’s commerce ministry has told alcohol makers it expects to settle a dispute over how bulk Scotch imports are classified, after industry groups met Commerce Secretary Sunil Barthwal on November 2. According to NDTV Profit, officials signalled that they would work with the finance ministry to reach a solution within the existing legal framework, while also keeping faith with India’s obligations under the India-UK free trade agreement. The aim, the ministry said, is to clear the uncertainty quickly enough to avoid disrupting supply chains and investment decisions in the liquor trade.
At the heart of the issue is the Harmonised System, the global customs coding framework used to classify traded goods. The World Customs Organization says the system is used by more than 200 countries and economies to support customs tariffs, trade statistics and other border rules. In practical terms, the code attached to an import can determine the duty it pays. That matters because Indian manufacturers bring Scotch whisky into the country in bulk for blending and bottling, rather than only in retail-ready bottles, and they want clarity on whether those shipments qualify for the lower tariff treatment promised under the trade pact.
The UK government’s summary of the agreement says India’s tariff on eligible whisky imports from the UK is due to fall from 150% to 75% when the deal takes effect, before declining further to 40% over 10 years. Mint reported that industry representatives left their meeting with officials reassured that the government would honour those commitments, but the unresolved question remains whether bulk Scotch used in domestic blending should be treated the same way as bottled imports for customs purposes. That distinction is important for companies that rely on imported Scotch as an input, including United Spirits, Radico Khaitan and Allied Blenders and Distillers.
For Indian liquor makers, the stakes are commercial as well as regulatory. Higher duties on bulk Scotch would raise input costs and could squeeze margins if companies are unable to fully pass those costs on to consumers. Industry sources quoted by Mint said lower duties had already started to support margins for some firms, while NDTV Profit noted that the domestic industry is also keen to ensure the free trade agreement strengthens local value addition rather than undermining it. United Spirits’ latest annual report, meanwhile, shows how central blended Scotch can be to some Indian whisky brands, underlining why the classification question has become so closely watched by the sector.
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