Tax officials visit Radico Khaitan offices and plant amid probe into bulk Scotch imports under India-UK pact

Tax officials have visited two offices and a manufacturing facility of Indian liquor maker Radico Khaitan, as the authorities widen a review of bulk Scotch imports brought in under the India-UK trade pact.

Radico Khaitan said on Tuesday that the visits by the Directorate of Revenue Intelligence (DRI) are part of “an industry-wide exercise” being carried out by the authority. The officials went to an office in Delhi, and to a manufacturing facility and another office in the northern state of Uttar Pradesh.

Also read: Radico Khaitan’s premium spirits have a moment as regular volumes lose ground


The company added that the visits have no impact on its financial or operational activities.

Reuters reported exclusively last week that the tax authority is looking into whether liquor giants Pernod Ricard and Diageo wrongly classified some bulk Scotch imports, which allowed them to pay lower tariffs. Reuters cited five industry sources for the report. It said tax inspectors had visited Pernod’s India office.

According to Reuters, the tax department is concerned that companies are classifying bulk Scotch concentrates as products eligible for the lower tariffs under the India-UK trade pact.

Reuters reported that Pernod and Diageo dominate India’s $65 billion alcohol market. Both import bulk Scotch concentrates in containers and mix them with other ingredients to make brands such as Royal Stag, Blenders Pride and McDowell’s.

What the trade pact provides

The pact took effect on July 15. Under it, India agreed to halve import taxes on some Scotch imports to 75 per cent from 150 per cent immediately. The duty is to fall to 40 per cent over 10 years, according to Reuters.

Reuters reported that Indian government inspectors have told companies that bulk imports of Scotch concentrates do not get the reduced 75 per cent tariff. They must be declared under a customs classification that attracts a 150 per cent duty, according to three people with direct knowledge of the matter who spoke to the agency.

Also read: Radico Khaitan flies Rampur, Sangam whiskies into Scotch’s backyard

In a letter to the commerce minister on Friday, the International Spirits and Wines Association of India, a group representing Diageo and Pernod Ricard, said the classification issue “risks undermining, in practice, an important market-access benefit” agreed between India and the UK, Reuters reported.

(With inputs from Reuters)