08-05-2025
3 Reasons India's Scotch Tariff Cut Is No Cause For Celebration
Is a 75% tariff really a win for scotch?
Mark Littler LTD
The reduction in scotch whisky tariffs as part of the new UK–India trade deal has been widely reported, and understandably so. A cut from 150% to 75% looks like meaningful progress, but the reality is more complex.
Already, cask investment companies are using the headlines to promote whisky casks as a safe investment, suggesting the tariff cut marks the start of a new export boom into India. One sales email, sent just two hours after the agreement was signed exclaimed 'This isn't just a win for distilleries and whisky drinkers, it's a game changer for the whisky cask industry [...] cask values are set to rise [...] as India opens its doors to Scotch like never before, the future of the whisky cask market looks brighter than ever.'
This comes just days after the collapse of Whisky Merchants Trading, which went into administration leaving thousands of customers potentially without casks. Many had only been issued certificates rather than delivery orders, exposing a long-standing cask investment company tactic: reducing a nuanced and complex area into a simple sales pitch.
So while it's easy to get swept up in a good news story, trade deals are rarely black and white, and this one is no exception. Here are three reasons why this tariff cut is unlikely to result in meaningful change for scotch whisky, especially at the premium end of the market.
The headline reduction from 150% to 75% might sound dramatic, but it's hardly cause for celebration. Even if you consider the long term plan to drop to 40% after ten years, Scotch whisky entering India still faces the highest import duty in the world. Halving an excessive tariff doesn't make it fair, it just makes it easier to spin or manipulate.
By comparison, other markets have taken more meaningful steps to reduce trade barriers. Until October 2024, Hong Kong imposed a 100% import duty on scotch. It has since cut that rate to 10%, a viable and workable level that is comparable with mainland China and the US (at present). Many countries, including Japan and those in the European Union, impose no import tariffs on scotch at all.
So while the headline reduction is, indeed, attention-grabbing, a 75% tariff is still a significant barrier, no matter how you look at it.
The 75% import duty is only the first of several layers of taxation once a bottle is imported into India. Imports are also subject to a range of state-level charges, many of which exceed the import duty itself.
While the UK has a single, consistent system, based on VAT and alcohol duty, applied across England, Wales, and Scotland. Even the American three-tier system appears almost straightforward compared to India. Each of India's 28 states and eight union territories sets its own tax regime, and many impose duties of 100% or more. Maharashtra, for instance, only recently reduced its rate from 300% to 150%. States such as Karnataka and Delhi typically impose duties of 80% to 100%. In addition to these excise duties, many states apply further sales taxes.
What these layers of taxes mean is that a bottle that sells for £100 in the UK can easily reach over £300 on an Indian shelf, due largely to tax.
In reality, the 75% tariff is only the start of a system that makes meaningful market access all but impossible.
Domestic consumption of Indian whisky is vast. Indians consume more than 2.4 billion bottles of whisky each year. McDowell's No.1 sold 31.4 million cases in 2023, around 50 percent more than Johnnie Walker's total global sales. In fact each of India's top four whisky brands outsells Johnnie Walker.
Johnnie Walker is the world's biggest selling scotch whisky, selling around eight bottles per second, every second of the day. To put India's total consumption in perspective, if Diageo redirected every bottle of Johnnie Walker sold globally (which is around 265 million bottles) exclusively to India, it would still only account for about 10 percent of India's annual whisky consumption. Scotland just just doesn't produce enough scotch to even make a dint in the Indian whisky market.
It's also important to realise that the Indian whisky market is dominated by high-volume, low-priced sales of spirit made from molasses rather than barley or other grain traditionally associated with whisky elsewhere in the world. The four best-selling Indian whisky brands are made with molasses.
Currently Johnnie Walker sales in India represent just 0.5 percent of total whisky volume in the country. Yes, this may in part be down to the higher price point, but I'd also argue that a premium scotch whisky, even a blend that is renowned to be softer, is going to be as different from Indian whisky as single malt scotch is to bourbon! As such success in the market for premium single malt scotch brands is far from a given.
You can see why scotch producers might be caught up in the figures and the potential. However a tax cut from very high to still high is still a significant barrier if you're a high value product like scotch. Halving tariffs from 150% to 75% signals intent, but I maintain that it does not make India a viable market for premium scotch. Even the additional drop to 40% after ten years, will still be high by global standards.
Currently scotch does not even have the volume to compete meaningfulling in India. What's more, the Indian whisky products that dominate currently may have the same name, but are meaningfully different in terms of taste and price!
There is also likely little pressure for further reform from major producers. The two largest scotch whisky producers, Diageo and Pernod Ricard, already sell some of the best-selling whisky brands in India. So removing barriers to allow more scotch brands into the market would mean more competition.
So let's be clear, yes it is an exciting step forward but I would caution against the current narrative that this is industry re-defining for scotch. The blanket celebration without context is providing fuel for indiscriminate cask investment companies to mislead whisky fans. We owe consumers, whisky lovers and those just looking at potential cask investments as an alternative, a clear and unbiased assessment of what the tariffs do and do not mean.
For now, the tariff cut is more symbolic than practical, and meaningful access to the Indian market for premium scotch remains out of reach.
