Luxury Watches in India: Why Import Duties Matter More Than Ever

 

The Indian luxury watch market is valued at around $1 billion annually and is dominated by premium Swiss brands like Rolex, Omega, Cartier, TAG Heuer, etc. The high import duties levied on finished watches aim to encourage localization of manufacturing while generating revenue for the government.

Recent data from the Federation of the Swiss Watch Industry FH, which represents over 500 members constituting over 90% of Swiss watch production, indicates the robust growth in demand for Swiss watches in India. As per their report, imports of Swiss watches into India touched 98.5 million Swiss francs (nearly Rs 933 crore) in the January to June period this year. This represents a 21% increase over the 81.2 million Swiss francs worth of imports in the same period last year, as highlighted in a recent report by the business publication Mint. The surge in demand despite high import duties highlights the attraction and aspiration associated with Swiss luxury timepieces in India.

What are the different import duties levied on luxury watches?

Breakdown of Import Duties:

• Basic Customs Duty - Set at 20% of the assessable value of the watch under the Customs Act, 1962. It has remained steady for years.
• Social Welfare Surcharge - An additional 10% surcharge is imposed on the essential customs duty to finance social welfare programs and introduced in the 2018 budget.
• Integrated Goods and Services Tax (IGST) - Levied at 18% on the sum total of product value and any customs duties. Applicable on imports and inter-state transactions.
• Special Additional Duty - Charged at 4%, this represents the equivalent excise duty on comparable goods manufactured in India.
• Cess - Currently a cess of 20% ad valorem is mandated on wristwatch imports having an MRP exceeding ₹10,000. Cess rates can be revised periodically.
• Mandatory BIS Hallmarking - All watch dials, mechanisms, and bands must conform to Bureau of Indian Standards hallmarking criteria effective January 2021. Adds to import compliance costs.
• Countervailing Duty (CVD) - Levied occasionally to offset subsidies provided to watch manufacturers in the exporting country.

Taken together, the total import duty on luxury watches works out to around 43.96% or more of CIF (cost, insurance, freight) value. This comprises - 20% basic customs duty, 10% surcharge, 18% IGST, 4% special additional duty and 20% cess.

For example, if your invoice value is $100 and the exchange rate is Rs 83, the total value becomes Rs. 8300. On this a 20% basic custom duty (Rs. 1600), 10% social welfare surcharge of 10% (Rs. 166) and an IGST of Rs. 18% (Rs. 1822) is levied. Total import duty & GST stands at 43.96% (Rs. 3648.88)

Many luxury Swiss brands have set up local presence through joint ventures with Indian companies to avail exemptions under the Manufacturing and Other Operations in Warehouse Scheme. Components are imported duty-free and watches assembled in India with over 50% value addition allows reduced duties of only 15% or so.

In addition to authorized dealerships, a thriving grey market exists where watches are imported from other markets with lower duties and sold illegally without warranties. High duties, brand premiums, and pent-up demand incentivize grey market operators. Periodic duty revisions and monitoring of unofficial channels can maximize revenue collection.

Market data indicates a notable shift in India's luxury watch purchase patterns lately, with consumers displaying a greater affinity for independent and authentic niche brands rather than more mainstream established labels. This prioritization of niche artisanal watchmakers over the market-dominating conventional giants represents a maturing of tastes and preference for exclusivity over ubiquitous brand names among Indian luxury consumers. The growth potential for curated, high-end yet emerging watch brands in India is immense.