New Tax Structure to Drive Sale of Luxury Brands in India
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New Tax Structure to Drive Sale of Luxury Brands in India

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Experts believe that the government's proposal to levy a 20% tax on expenditures made abroad under the Liberalised Remittance Scheme in excess of Rs 7 lakh in a fiscal year beginning October 1 will increase the sale of luxury brands in India.

As international travel restrictions shifted sales to domestic stores, Covid helped boost demand for luxury brands in India. This is expected to increase further as the price gap between foreign and domestic markets narrows after accounting for the 20% tax collected at source (TCS), according to mall owners.

"Previously, an Indian consumer would travel to Dubai or London to shop, but when the pandemic struck, many of those brands, such as Chanel or Hermes, called their Indian consumers to do small events inside the store." Customers who visit the brand's store in India for the first time are surprised to learn that the price difference is only about 15%. "Millennials prefer luxury brands as well, which is driving growth," said Pushpa Bector, senior executive director at DLF Retail, which operates premium malls throughout the Delhi-National Capital Region.

Global luxury brands are bullish on the Indian market as well. Aditya Birla Fashion Retail recently partnered with Galeries Lafayette, a French luxury department store chain, and Reliance Brands recently signed a deal to bring global luxury brands Valentino and Balenciaga to India.