Diageo and Pernod Ricard, along with their Indian lobbying group, have filed a lawsuit against the Maharashtra state government over a steep tax hike on their affordable liquor brands and their exclusion from a newly created lower-tax category for local manufacturers.
Maharashtra, which accounts for 7% of India’s premium liquor consumption, is home to major factories for both companies, and Mumbai serves as a key market for targeting affluent urban consumers.
Between June and August, the state introduced a policy called “Maharashtra Made Liquor”, aimed at boosting local investments. Under this scheme, manufacturers headquartered in the state with zero foreign investment can sell liquor products with a 270% tax, while taxes on other premium brands in the affordable segment were raised from 300% to 450%. Affected brands include Diageo’s McDowell’s, Pernod’s Royal Stag, Tilaknagar’s TI Imperial Blue, and Allied Blenders and Distillers’ Officer’s Choice.
The International Spirits and Wines Association of India (ISWAI) has argued that the policy creates trade barriers, requesting the courts either to quash it or allow companies with foreign investment to benefit from the lower tax system. The case is scheduled for hearing in Mumbai High Court on December 9.
ISWAI criticized the policy, saying it grants an “artificial competitive advantage to the preferred class”. The Maharashtra government, while not responding to Reuters queries, has stated that the policy aims to create jobs, attract new investments, increase factory capacity, and generate an additional $1.56 billion in annual revenue.
The affected affordable segment contributes 70% of Maharashtra’s premium spirit sales, according to Anant S. Iyer, Director General of the Confederation of Indian Alcoholic Beverage Companies. He added that sales of impacted brands have fallen 35-40% in recent weeks following the tax hike.
India is the world’s eighth-largest alcohol market, generating annual revenues of $45 billion, with each state implementing its own regulations and pricing. Global liquor firms are also seeking $337 million in overdue payments from a Telangana state-run depot and face tighter advertising restrictions along with several antitrust investigations.