Indian luxe market crippled, festive sales drop due to govt regulations
The luxury market in India has taken a hit this festive season. High taxation, coupled with other regulations, has negatively impacted the sale of high-end gifting items such as luxury watches and jewellery this Diwali, according to a report in the Economic Times.
Measures, such as the imposition of a 1% excise duty on gold and diamond jewellery products and a 1% luxury tax on items worth more than 2 lakh, have led to a drop in sales of several luxury goods in the country's best business season, say retailers and market watchers.
The government has also made it mandatory for customers to share their PAN or permanent account number for cash transactions of more than 50,000 rupees. A PAN is unique 10-digit alphanumeric identity allotted to each taxpayer by the Income Tax Department under the supervision of the Central Board of Direct Taxes. It also serves as an identity proof.
“Business has dropped this year due to government regulations. There is panic regarding the PAN card situation as customers do not want to use their PAN cards,” said Ashish Dhar, Manager at Cartier store at luxury mall Emporio in New Delhi.
The French luxury brand typically records a 10-15% increase in sales during Diwali, but that did not happened this year.
Sonam Varma, manager at the Dior store at Emporio Mall, said the “market is a little dead this year“ mainly because people are hesitant to share PAN details.
A prominent luxury watch seller, who asked not to be identified, said his business has seen negative growth this Diwali as, he said, people are too “scared” to gift expensive items.
According to estimates shared by market research firm Euromonitor, overall retail value sales of luxury goods in India dropped to 21.7% in 2016 from 24.5% in 2015.
“Measures to curb black money including I-T raids, government's order to provide list of all PAN numbers at the end of each month of consumers who buy jewellery worth 2 lakh, created panic among high net worth individuals,“ said Shreyansh Kocheri, research analyst at Euromonitor International.
The company measured end-to-end retail sales across categories like luxury jewellery, watches, designer apparel, footwear and luxury travel goods.
Luxury jewellery retail value sales growth fell to 19% in 2016 from 23% in 2015, watch retail sales dropped to 15.5% from 18%, designer apparel and footwear (ready-to-wear) sales growth dropped to 21% from 24%, and travel goods sales growth declined to 23% this year from 28% last year.
Euromonitor has pegged the size of the luxury goods market in 2016 in India at Rs 21,610 crore in retail value sales.
Industry body Assocham is in the process of putting together a set of proposals to the government for the luxury industry .
“By putting in so many regulations and crippling the industry there is loss of revenue to the government by way of import duty and value-added tax and, in turn, loss of employment as well. The consumer will continue to indulge and will hence buy overseas,” said Pratik Dalmia, chairman of Assocham National Council on Luxury and Lifestyle.
He said there's a broad consensus in the industry on the impact of new regulations.
Copyright © 2022 FashionNetwork.com All rights reserved.