Tax officials in India are investigating Diageo and Pernod Ricard over the classification of some of their bulk Scotch imports.

In a Reuters report yesterday (19 October) "five industry sources familiar with the matter" said the probe is looking to establish if the companies had incorrectly classified imports, enabling them to pay lower tariffs under the trade agreement between the UK and India.

The trade deal between the two countries came into effect in July. Under the agreement, India's duties on UK whisky exports have been halved from 150% to 75%. They will be reduced further to 40% over the next decade.

Three sources told Reuters tax inspectors visited Pernod's head office in New Delhi last week and asked the group's executives about their Scotch imports.

Two other sources also told the news outlet that Diageo was being investigated about how it classifies some of its Scotch imports.

In a stock-exchange filing over the weekend, Diageo's Indian arm United Spirits said searches led by the Directorate of Revenue Intelligence (DRI) were "initiated at multiple locations" on Friday (16 October).

"The company understands that the search operations form part of an industry-wide exercise being conducted by the Revenue Authority," the filing read.

United Spirits said it "has extended its full co-operation and assistance in the aforesaid matter and has duly furnished all documents, clarifications and information as sought by DRI during the said search".

The group added there was no effect on its "financial operation or other activities of the company as of now" and that it would "continue to provide full cooperation as the matter progresses".

In a statement to Reuters, Pernod said it was cooperating with DRI and providing all requested information. It also said it was committed to addressing any of the authorities' questions.

Pernod said it had no further comment to provide beyond the statement provided to Reuters, when approached by Just Drinks.