High customs duty, a deterrent to luxury brands’ India plans

As per Altagamma foundation, while the Indian luxury market is full of lucrative opportunities, high custom duty on luxury goods is proving to be a hurdle to premium foreign labels’ India plans. “Next to Brazil, India has the highest tariff barrier. There is a 38 percent custom duty levied on leather goods in India while in China it is 17 percent, Japan 11 percent, and no custom duty in Singapore and Hong Kong,” opined Armando Branchini, Vice-Chairman of Altagamma foundation, a conglomerate of several high-end Italian companies, during the Mint Luxury conference in Mumbai.

Another reason cited by Charlotte Keesing, Director at Walpole British Luxury is that while the high custom duty forces luxury brands to subsidize their price to be in India taking a hit on their profitability, 100 percent foreign direct investment in single-brand retail has a hurdle of sourcing 30 percent of manufacturing requirements from India. Since luxury labels invest a lot into maintaining the same product quality, they don’t expect the same kind of product in India by making it here.

However, Amitabh Kant, Secretary, Department of Industrial Policy and Promotion (DIPP) feels, the custom duty levied on luxury goods only makes a marginal difference. He said that the existing customs duty is also a reflection of the inability to strike a free trade agreement with the European Union and it is working on negotiating the FTA in such a way that it benefits both India and EU.