India-UK FTA: Alcohol Body Asks States To Withdraw Concessions For Imported Scotch

India's landmark free trade agreement (FTA) with the UK is set to make Scotch whisky cheaper over the coming years. But even before the first tariff cut takes effect, India's domestic liquor industry has raised a red flag.

The Confederation of Indian Alcoholic Beverage Companies (CIABC), the top body representing Indian liquor manufacturers, has urged state governments to withdraw policy concessions enjoyed by imported liquor brands. The industry fears that once customs duties come down under the India-UK trade pact, imported spirits could gain an unfair pricing advantage over Indian-made products.

The concern is not over the FTA itself. In fact, the industry has welcomed the agreement. The worry is what happens when lower import duties combine with favourable state-level taxes and fees already available to imported brands.

A Historic Deal, But New Fears Emerge

Under the India-UK Comprehensive Economic and Trade Agreement (CETA), India will reduce import duties on UK whisky and gin from 150 per cent to 75 per cent initially, with tariffs falling further to 40 per cent over a 10-year period. The agreement is scheduled to come into force on July 15.  

The phased reduction was designed to give domestic manufacturers time to adjust. Industry players also acknowledge that lower duties on Scotch could benefit Indian companies that use imported Scotch as an ingredient in bottled-in-India products. 

However, CIABC says a much bigger issue lies at the state level.

According to the industry body, several states including Delhi, Haryana, Maharashtra, Madhya Pradesh, Odisha, Assam and Kerala already provide favourable treatment to Bottled-in-Origin (BIO) imported liquor through lower taxes, lower registration fees, easier market access or reduced retail margins.

If customs duties fall while these benefits remain, imported brands could enjoy what the industry describes as a "double advantage".

'Competitive Neutrality Needed'

Anant S Iyer, Director General of CIABC, told NDTV that the industry supports the trade agreement but wants a level playing field.

"We welcome this historic trade agreement, but we urge State Governments to ensure competitive neutrality between Indian-made products and BIO imports," Anant S Iyer said.

He noted that imported brands already receive favourable treatment in several states and warned that tariff reductions under the FTA could further widen the gap.

According to Iyer, the objective is not to restrict consumer choice but to ensure that Indian-made premium spirits, bottled-in-India products and imported brands compete under similar conditions.

State Policies Under Scanner

CIABC has highlighted several examples where imported products allegedly enjoy significant advantages.

In Haryana, Indian-made foreign liquor (IMFL) faces brand registration fees that can be up to 30 times higher than those for imported products. VAT on IMFL can also be four times higher. The industry estimates the lower VAT structure for imported products could cost the state Rs 200-250 crore annually.

In Kerala, IMFL attracts sales tax of 251 per cent and a 20 per cent retail margin, while imported BIO products face sales tax of 115 per cent and a retail margin of just 6 per cent.

In Delhi, imported brands reportedly enjoy lower effective entry costs. Indian premium brands pay licence fees ranging from Rs 8 lakh to Rs 25 lakh per brand, while imported labels can register multiple brands under a significantly lower fee structure.

CIABC argues that these disparities become even more pronounced once customs duties on imported liquor begin falling under the trade pact.

Premium Indian Brands Feel Most Vulnerable

The concern is particularly acute in the premium and luxury segments.

Indian single malts, premium gins, luxury whiskies and bottled-in-India Scotch brands have spent years building credibility in domestic and global markets. But industry executives fear cheaper imports could slow that momentum if tax structures continue to favour foreign products.

CIABC estimates that imported BIO products already account for around 25 per cent of the premium-and-above spirits segment, and their share is growing.

"Any policy structure that makes imported products structurally more attractive than Indian-made products weakens the domestic value chain and runs contrary to the spirit of Make in India, Vocal for Local and Atmanirbhar Bharat," Anant S Iyer said.

He called on state governments to move towards parity-based excise structures so that imported and domestic products compete on equal terms.

Why The Stakes Are High

The debate comes at a time when India's alcohol market is expanding rapidly.

India is already the world's largest whisky market by volume and the biggest destination for Scotch whisky exports. Industry estimates show India imported about 192 million bottles of Scotch whisky in 2024, more than any other country globally. Yet Scotch still accounts for only around 3 per cent of India's overall whisky consumption by volume, highlighting the dominance of domestic brands.  

Premiumisation is also reshaping the industry. Consumers are increasingly trading up to higher-priced spirits, helping premium categories grow faster than the broader market. Premium spirits sales rose 8 per cent in the first half of 2025, according to industry data.  

At the same time, India's alcohol market remains one of the fastest-growing globally. Research firm IWSR expects India to become the world's second-largest alcohol market by 2032, even as overall global alcohol consumption slows.  

Industry Divided Over FTA Impact

Not everyone in the sector sees the tariff cuts as a threat.

Companies dependent on imported Scotch believe lower duties could boost consumption, expand premium categories and strengthen bilateral trade. Several industry groups have welcomed the agreement, saying it could encourage investment and make premium international brands more accessible to Indian consumers.  

Some analysts also point out that imported whisky growth has already started slowing after the post-pandemic boom. Imported whisky sales grew 5 per cent in 2025, down from previous years, suggesting demand may not explode overnight even after tariffs are reduced.  

Still, for domestic manufacturers, the issue is less about imports and more about policy symmetry. Their message to state governments is straightforward: if import duties are falling under the India-UK FTA, local tax structures should not further tilt the playing field in favour of imported brands.