Diageo and Pernod Ricard’s industry body has taken the Maharashtra government to court, challenging a sweeping change in the state’s excise structure that has sharply raised taxes on popular affordable whisky and created a lower-tax bracket that excludes companies with foreign investment. The petition, filed by the International Spirits and Wines Association of India, will be heard by the Bombay High Court on 9 December.

The dispute centres on a policy introduced between June and August that created a new category called Maharashtra Made Liquor. Only manufacturers headquartered within the state and operating without any foreign investment are eligible. Brands in this category attract a 270 percent tax, which is significantly lower than the 450 percent levy now imposed on competing labels from global groups and other Indian producers whose cost of production falls below 260 rupees a litre.

The tax jump has hit some of India’s best-known mass-market whiskies. Diageo’s McDowell’s, Pernod Ricard’s Royal Stag, Tilaknagar Industries’ Imperial Blue and Officer’s Choice from Allied Blenders have all seen their margins squeezed and retail prices rise in a market that accounts for around seven percent of India’s premium spirits consumption. Mumbai alone remains one of the most lucrative urban centres for multinational liquor companies.

Industry executives say the policy has led to an immediate contraction in sales. According to the Confederation of Indian Alcoholic Beverage Companies, volumes of affected brands have fallen between thirty-five and forty percent since the new taxes came into effect. The association argues the policy effectively creates trade barriers and gives select local manufacturers an unfair head start.

The state government has defended its strategy, saying it expects the revised structure to encourage fresh investment, expand capacity at existing plants and bring in nearly one and a half billion dollars in additional annual revenue. Global spirits makers, meanwhile, continue to grapple with regulatory and financial challenges in other states, including overdue payments in Telangana and tighter scrutiny on advertising and competition practices.