Pernod Ricard in hot water over Indian import duty payments

Indian authorities have demanded US$244m from Pernod Ricard for reportedly avoiding import duties for a decade.

 

According to a notice from India’s customs authority, reported by Reuters, the French drinks giant has been undervaluing concentrate imports for the past 10 years.

The notice, dated 27 June, relates to liquor concentrates imported from a Pernod subsidiary, UK-based Chivas Brothers.

Pernod Ricard has reportedly since challenged the $244m tax demand and an Indian court will hear the case on Tuesday, this week.

According to reports on the notice, Indian authorities inspected the drinks company’s import bills for 2009-10 to 2020-21, and found Pernod Ricard India had undervalued liquor concentrates in its declarations, all of which resulted in the firm paying lower import duty amounts.

The note allegedly states that Pernod Ricard owed additional duty of INR20.1 billion (US$244 million), plus interest, for imports up to 2020.

The 27-page notice revealed that, in order to compensate for the undervalued imports, Pernod Ricard’s India arm had instead paid “hefty” dividends to Pernod Ricard in France. However, import duties on liquor concentrates are 150% while dividends attract lower taxes.

The notice said: “There are ample reasons to doubt the truth or accuracy of the value declared in relation to the imported goods. 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.”

In a statement, Pernod Ricard India has said was working on “asserting and demonstrating its position to the Indian authorities” and added: “We have always endeavoured to act with full transparency and in compliance with customs and regulatory requirements.”

The notice also included the suggestion that Pernod Ricard needs to increase the invoice values of different malt concentrates that it imports by 67.49%, for bills from 2021.

According to the notice, Pernod was not following “arm’s length” principles, which set out to make sure that all cross-border transactions between group companies are valued as if the transaction was with an unrelated company.

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