The Government of India is all set to implement a 20 per cent tax on expenditures made outside the country exceeding Rs. 7 lakh, from 1st October 2023, under the Liberalised Remittance Scheme. This tax initiative aims to narrow the price disparity between foreign and local markets. In the wake of Covid-19-related travel restrictions and numerous domestic retailers collaborating with international luxury brands, this tax is poised to further stimulate the sale of luxury goods within India.
Pushpa Bector, Senior Executive Director at DLF Retail, pointed out that prior to the pandemic, Indian consumers often indulged in overseas shopping. However, as travel constraints took hold, international luxury brands actively encouraged consumers, including millennials, to explore their offerings in local cities, as the price difference too was around a minimal 15 per cent.
Uzma Irfan, Director of the Bengaluru-based Prestige Group, responsible for the UB City mall housing renowned brands like Louis Vuitton, Rolex, Rado, and Jimmy Choo, disclosed that many luxury brands in her mall experienced triple-digit revenue growth since the Covid era. They foresee this upward trajectory continuing in the near future.
In a bid to tap into new demographics and showcase their collections, luxury brands have forged collaborations with Indian retailers. For instance, Aditya Birla Fashion Retail partnered with the esteemed French luxury department store chain Galeries Lafayette, while Reliance Brands collaborated with global luxury brands such as Valentino and Balenciaga. These initiatives have made a wide array of luxury brands accessible in India. The forthcoming tax reform will further encourage Indian shoppers, while abroad, to allocate their Rs. 7 lakh limit to other expenditures, other than purchasing goods that are available in the country.
