<p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif; font-size: 16px;"><span class="">Indian tax authorities have searched the premises of United Spirits, the Indian unit of Diageo, as part of an investigation into whether liquor majors Diageo and Pernod Ricard misclassified bulk Scotch imports to benefit from lower tariffs under the India–UK Free Trade Agreement . The search by Maharashtra's Commissioner of State Tax was initiated on 19 October and concluded on 23 October, according to a company statement on 30 October 2026 . United Spirits said there was no impact on financial or operational activities due to the search, and it did not provide details on the reason for the search or which premises were involved .</span></p><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif; font-size: 16px;"><span class="">The investigation centres on the classification of bulk Scotch concentrates under the India–UK trade pact, which took effect on 15 July 2026. Under the agreement, India agreed to halve import taxes on some Scotch imports to 75% from 150% . Reuters reported earlier this month, citing sources, that the tax department is concerned that companies are wrongly classifying bulk Scotch concentrates as products eligible for lower tariffs under the pact . The distinction matters because the FTA's tariff concessions apply to specific product categories, and the classification of bulk concentrate versus finished product determines the applicable duty rate.</span></p><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif; font-size: 16px;"><span class="">The timing of the investigation is significant because it follows the implementation of one of India's most significant recent trade agreements. The India–UK CETA was highlighted in the government's FTA outreach programmes as a key achievement, with officials briefing exporters on how to use the agreement's preferential access . The investigation suggests that the utilisation of the agreement is being scrutinised not only for whether exporters are claiming benefits, but also for whether importers are correctly classifying goods to claim concessions they may not be entitled to.</span></p><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif; font-size: 16px;"><span class="">For the logistics and trade sector, the investigation has implications that extend beyond the liquor industry. It signals that customs and tax authorities are actively monitoring FTA utilisation for compliance, and that misclassification carries enforcement risk. For importers using India's expanding network of trade agreements, the case is a reminder that the benefits of preferential access depend on accurate product classification and documentation, and that the rules of origin and product-specific rules in each agreement are subject to audit.</span></p><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif; font-size: 16px;"><span class="">The India–UK FTA context is relevant to the broader trade relationship. The agreement was presented as a major opportunity for Indian exporters in textiles, leather, and engineering goods, and for British importers of Indian products. The liquor tariff concession was one of the more sensitive provisions, given the domestic alcohol industry's concerns about competition from imported Scotch. The investigation into misclassification suggests that the tariff reduction is being closely monitored for whether it is delivering the intended benefits without being exploited through improper classification.</span></p><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif; font-size: 16px;"><span class="">United Spirits' financial performance provides a backdrop to the investigation. The company reported lower second-quarter profit on Wednesday, with net sales value for its popular liquor segment declining sharply, hurt partially by a steep tax on non-local brands in Maharashtra . The search by state tax authorities adds regulatory pressure at a time when the company is already facing weak domestic demand and state-level taxation challenges.</span></p><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif; font-size: 16px;"><span class="">For India's import procedures and customs administration, the case illustrates the tension between trade facilitation and compliance enforcement. The government has been promoting FTA utilisation through outreach programmes and digital platforms for certificates of origin, but it is also increasing scrutiny of how those benefits are claimed. The investigation into Diageo and Pernod Ricard suggests that the enforcement side of the equation is being strengthened alongside the facilitation side, and that companies claiming FTA benefits face audit risk if their classification decisions are challenged.</span></p><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, &quot;Segoe UI&quot;, Roboto, Oxygen, Ubuntu, Cantarell, &quot;Open Sans&quot;, &quot;Helvetica Neue&quot;, sans-serif; font-size: 16px;"><span class="">Looking ahead, the outcome of the investigation will depend on whether the tax authorities conclude that the classification of bulk Scotch concentrates was incorrect, and whether penalties or duty recoveries follow. For the broader importer community, the case is a signal that FTA utilisation is being monitored and that documentation and classification decisions should be defensible. For the India–UK trade relationship, the investigation is a reminder that tariff concessions, once granted, create incentives that must be managed through effective compliance oversight.</span></p>