Budget Impact: Rs 3 lakh cash limit will not hamper luxury purchases

Purchases of luxury products like expensive watches and high end bags can be paid for in cash only up to three lakh. However, there is already an anti-black money measure in place – from January 1, 2016, permanent account number has been made mandatory for purchases above two lakh rupees. But many luxe dealers and retailers feel it will not make a difference. Manoj Doriyal of Salvatore Ferragamo, Italian luxury goods firm, feels the limit wouldn’t make a difference as they functioned almost completely through card transactions. He says card payments went up 80 per cent in the past couple of months for products that cost over Rs 1 lakh. Smaller items like belts, cuff links, pocket squares and ties that cost between Rs 10,000 and Rs 20,000 are being bought with cash.

The luxury goods sector was already hit by the imposition of a one per cent excise duty on gold and diamond jewelry products in the previous budget. High end jewelry and watches, which were purchased as heirlooms, and big ticket transactions for weddings will take a hit.

Luxury cars, however, may have more of a problem, at least in the near term. Sales of luxury vehicles and high-end sports utility vehicles may get impacted as customers hailing from the real estate or construction sectors tend to pay in cash. However, this hit will be temporary as consumers get adjusted and move towards a more cashless economy. Kerala, Karnataka, Tamil Nadu and Andhra Pradesh account for 40 percent of the 900 tons of gold India consumes annually. Post demonetisation, there has been a huge surge in the percentage of transactions through cheques and cards. However, Mehul Choksey, MD of the Mumbai-based Gitanjali Group assures the Budget proposal would hardly impact because PAN card above Rs 2 lakh is already in place.