Cash curb to have minimal impact on sales of luxury goods

By

Maverick Martins

Published
Feb 2, 2017

The Finance Ministry’s announcement for the budget 2017, which bans cash transactions above Rs 3 lakh, will not have any impact on the sales of luxury items due to the existing measure of furnishing permanent account number (PAN) for purchases above Rs 2 lakh, say sellers of luxury items.

“It could hardly [have an] impact because PAN card above Rs 2 lakh is already there,” said said Mehul Choksey, managing director of the Mumbai-based Gitanjali Group told the Economic Times.

Jewellers in South India are also unfazed. Kerala, Karnataka, Tamil Nadu and Andhra Pradesh account for 40% of the 850-900 tonnes of gold India consumes annually.

Joy Alukkas, chairman of the Kochi-based Joyalukkas group, said, “Post demonetisation, nearly 80% of the transactions are through cheques and cards. Therefore, even if the cash transaction is limited to Rs 3 lakh, we do not see an impact on sales.”

The luxury goods sector was already hit by imposition of a 1% excise duty on gold and diamond jewellery products in the previous Budget.

Manoj Doriyal of Salvatore Ferragamo, an Italian luxury goods firm, reckoned that the restriction wouldn’t make a difference as they functioned almost completely through card transactions.

“Payments through cards went up by almost 80% 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,” he said.