INDIA ORDERED PERNOD RICARD TO PAY USD244M FOR UNDERVALUING WHISKY IMPORTS
By Susan Lewis
Source: Pernod Ricard
India’s custom authority has demanded duty payment of INR20.1 billion (USD244 million) from Pernod Ricard India for having undervalued concentrate imports to avoid full duty payments for over a decade, Reuters news agency reported.
Pernod Ricard India has challenged the tax demand and an Indian court will hear the appeal tomorrow.
Quoting a 27-page notice to Pernod Ricard from Indian customs authority dated 27 June, Reuters said the alleged undervaluation relates to liquor concentrates imported from Pernod Ricard owned Scotch maker Chivas Brothers.
The notice said the company owed INR20.1 billion of import duties plus interest, for undervaluing liquor concentrates in its declarations for imports between 2009 and 2020.
Instead of paying import duties to India, the notice said, Pernod India paid "hefty" dividends to the group's holding company, Pernod Ricard in France.
"It appears that the import price has been decided in such a manner as to maximise profits accruable to holding companies ... The aspect of undervaluation has been taken care of by way of payment of hefty amounts as dividends to the ultimate holding company," said the notice.
Indian customs authority also said that Pernod Ricard should increase the invoice values of different malt concentrates it imports by 67.49 percent, for bills from 2021.
In a statement, Pernod Ricard India said it was working on "asserting and demonstrating its position to the Indian authorities."
"We have always endeavoured to act with full transparency and in compliance with customs and regulatory requirements," it said, declining further comment as the matter was in court.
According to IWSR Drinks Market Analysis, Pernod Ricard accounts for 17 percent of the India's liquor market by volume with brands such as Chivas Regal, Glenlivet, Blenders Pride and 100 Pipers.
India is a very complicated market for liquor exporters. Five Indian states including Bihar and Gujarat are banning alcohol, in states where alcohol is not banned, the state governments set their own alcohol prices and goods and service (GST) rates on top of the very high 150 percent of import duty.
Liquor companies will also have to deal with the different liquor licensing laws across the 28 states and the 8 union territories in India.
Pernod Ricard’s main competitor, Diageo, had earlier paused sales in India in an attempt to lobby for retail price increase, and to include liquor in the national unified GST scheme.
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