Bulk Scotch classification: Industry seeks clarity on duty benefits

It is seeking the ministry's intervention amid enquiries by officials of a revenue intelligence agency into bulk whisky imports by some liquor companies. Officials have visited the offices of certain companies to seek clarifications and import-related documents. 3 billion in Iranian military imports – Reuters report At the centre of the issue is whether bulk Scotch should be classified under Chapter 22, Heading 2208, which specifically covers spirits and whisky, or Heading 2106, relating to food preparations not elsewhere specified or included.

The industry maintains that bulk Scotch remains whisky irrespective of whether it is imported in retail bottles or larger containers for subsequent blending and bottling. The issue has industry-wide implications as around 80% of Scotch whisky imports from Scotland by volume comprise bulk shipments, according to industry representatives. Indian companies use these imports for blending and bottling operations, including production of Indian-made whiskies using proprietary recipes.

Under CETA, which came into force on July 15, India reduced the basic customs duty on eligible Scotch whisky from 150% to 75% in the first year, with a progressive reduction to 40% over 10 years. The agreement provides separate tariff lines for whisky imported in containers exceeding two litres and retail containers of up to two litres. Bulk Scotch is covered under HS 2208 30 92, while retail bottles fall under HS 2208 30 12.

The industry argues that Heading 2106 is a residual category for food preparations not classified elsewhere, whereas Heading 2208 specifically covers spirits and includes a dedicated subheading for whisky. It says the size of the container does not change the essential character of the product. Industry fears that classification under HS 2106 would take qualifying bulk whisky outside the specific whisky tariff concessions.

Alcoholic beverage concentrates classified under HSN 22071011 attract an initial preferential duty of 110%, compared with 75% for finished Scotch whisky under HSN 22083012 and 22083092. The duty on concentrates will progressively decline to 75%, while that on finished whisky will fall to 40% over nine instalments. Ajay Srivastava of the Global Trade Research Initiative said CETA explicitly provides for bulk Scotch imports and does not restrict tariff benefits to retail bottles.

Both categories qualify for the preferential rates, subject to rules of origin. He said the agreement's change-in-tariff-heading rule requires qualifying products to undergo the prescribed tariff shift. Simple dilution and bottling of imported high-strength alcohol or neutral grain spirit would not, by themselves, confer the UK origin. Scotch whisky must also meet the requirements of distillation and maturation in Scotland.