Global Liquor Giants Challenge Maharashtra’s “Discriminatory” Alcohol Tax 

In a significant legal challenge, the International Spirits and Wines Association of India (ISWAI), representing global liquor giants Diageo and Pernod Ricard, has sued the Maharashtra state government over a new tax policy that creates a discriminatory two-tier system.

The policy introduces a “Maharashtra Made Liquor” category with a 270% tax for local firms with zero foreign investment, while raising the tax to 450% for other premium affordable brands, which has led to a 35-40% sales drop for affected brands like McDowell’s and Royal Stag. The lawsuit, to be heard by the Mumbai High Court, argues the policy creates unfair trade barriers and grants an artificial advantage to local companies, posing a major threat to the operations of global players in a state that accounts for 7% of India’s premium liquor consumption.

Global Liquor Giants Challenge Maharashtra’s “Discriminatory” Alcohol Tax 

Introduction 

A significant legal battle is unfolding in India that pits two of the world’s largest spirits producers against the government of Maharashtra. The International Spirits and Wines Association of India (ISWAI), which represents global beverage giants Diageo and Pernod Ricard, has filed a lawsuit challenging the state’s controversial new liquor tax policy. 

The core of the dispute lies in a two-tiered tax system that critics argue unfairly favors local companies with no foreign investment, granting them a substantial competitive advantage. The policy has sent shockwaves through the industry, causing sales of some of India’s most popular whisky brands to plummet and raising broader questions about the business climate for foreign investors in one of India’s most prosperous states. 

The Anatomy of Maharashtra’s New Liquor Tax Policy 

The legal confrontation stems from policy changes that the Maharashtra government rolled out between June and August 2025. The state government introduced a new category labeled “Maharashtra Made Liquor,” which comes with a significantly lower tax rate. 

The tax structure is the central point of contention: 

• For eligible local manufacturers: Products falling under the “Maharashtra Made Liquor” category are taxed at 270%. 

• For other manufacturers, including foreign-affiliated companies: The tax on premium, affordable brands—those with a production cost below ₹260 (approximately $3) per liter—was raised to 450%, a sharp increase from the previous rate of 300%. 

Eligibility for the beneficial tax rate is not universal. To qualify, a manufacturer must be headquartered within Maharashtra and have zero foreign investment. This specific criterion effectively excludes the Indian units of multinational corporations like Diageo and Pernod Ricard, even though they operate large factories within the state. 

The Real-World Impact: Brands and Sales in Crisis 

The immediate effect of this policy has been severe for the brands not eligible for the lower tax bracket. 

Major brands affected by the tax hike include: 

• McDowell’s (owned by Diageo), which the company claims is India’s largest-selling whisky brand. 

• Royal Stag (owned by Pernod Ricard). 

• Imperial Blue (from Tilaknagar Industries). 

• Officer’s Choice (from Allied Blenders and Distillers). 

The financial impact has been rapid and dramatic. According to Anant S. Iyer, Director General of the Confederation of Indian Alcoholic Beverage Companies, sales of the impacted brands have fallen by 35-40% in the weeks following the tax increase. This is a substantial blow in a market where the affordable segment contributes to 70% of Maharashtra’s premium spirit sales. For global companies, the stakes are high, as Maharashtra accounts for 7% of India’s premium liquor consumption, with Mumbai being a critical hub for targeting affluent urban consumers. 

The Legal and Political Battlefield 

In response, ISWAI took its grievance to the Bombay High Court, filing a petition on November 14, 2025. The industry body’s argument is twofold. It contends that the state’s policy “creates trade barriers” and has sought to grant an “artificial competitive advantage to the preferred class” of local businesses. 

ISWAI has asked the court for one of two remedies: 

• To strike down the policy entirely. 

• To allow companies with foreign investment to participate in the lower-tax system, creating a level playing field. 

The Maharashtra government has publicly defended its policy, stating that the changes are designed to boost local investment, create jobs, increase the operating capacity of existing factories, and generate an additional $1.56 billion in annual revenue. The government did not, however, respond to specific queries from Reuters about the lawsuit. The case is scheduled for a hearing before the Mumbai High Court on December 9, 2025. 

A Broader Pattern of Challenges 

This lawsuit is not an isolated incident for global spirits makers in India. The companies are simultaneously grappling with several other regulatory and financial hurdles across the country: 

• They are demanding $337 million in overdue payments from a state-run depot in Telangana. 

• They face planned tougher advertising restrictions. 

• They are subject to several antitrust investigations. 

These challenges highlight the complex and often fragmented regulatory environment in India, where each state sets its own rules and pricing for alcohol, a market worth an estimated $45 billion annually. 

Analysis: Economic Nationalism vs. Global Investment 

The conflict in Maharashtra reveals a tension between two competing economic visions: one favoring local businesses and another seeking to attract and retain global investment. 

The State’s Perspective: From the viewpoint of the Maharashtra government, the policy is a tool for stimulating local economic development. By creating incentives for domestic companies, the state aims to foster home-grown industries, encourage investments within its borders, and create jobs for its residents. The anticipated $1.56 billion in additional revenue is a powerful motivator for a state government looking to fund its initiatives. 

The Industry’s Perspective: For multinational corporations and their representatives, the policy is a form of protectionism that distorts the market. ISWAI’s lawsuit argues that the rules are exclusionary and discriminatory, penalizing companies for having foreign investment, even though they manufacture locally and contribute to the economy through their operations and employment. Diageo’s Indian unit, United Spirits, succinctly captured this sentiment by stating that while Maharashtra is a key market, it hopes for a “level playing field”. 

Conclusion: A Precedent-Setting Confrontation 

The outcome of the lawsuit filed by Diageo and Pernod Ricard’s lobbying group against the Maharashtra government will be closely watched by both domestic and international businesses. It is more than a dispute over liquor taxes; it is a test case for how India’s states balance the promotion of local industry with the principles of fair competition and open markets. 

A ruling in favor of the state could embolden other regions to implement similar protectionist policies, potentially complicating India’s appeal as a uniform market for foreign investors. Conversely, a ruling in favor of ISWAI could reinforce the need for regulatory consistency and non-discriminatory treatment of businesses, regardless of their origin. The decision of the Bombay High Court on December 9 will mark a significant moment for the future of foreign investment in India’s highly regulated sectors.