GST Council may Step Anti-Clockwise on GST rates of Luxury Watches & Shoes

In a significant development, the Group of Ministers ( GoM ) on Saturday(as reported by Hindu BusinessLine) agreed upon some Goods and Service Tax ( GST ) rate revisions which are likely to increase the GST rate specifically on Luxurious Watches and Shoes.

Union Minister for Finance and Corporate Affairs Nirmala Sitharaman chairs the 55th meeting of the GST Council, in Jaisalmer, Rajasthan, today.

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The GoM,head suggested raising the GST rate on wrist watches above ₹25,000 from 18 per cent to 28 per cent. Further proposed  hiking GST on shoes above ₹15,000/pair from 18 per cent to 28 per cent.

This proposed hike comes amid growing concerns over the surge in demand for luxury goods in India, with both the luxury watch and sneaker industries expanding rapidly. As the country’s middle and high-income groups continue to embrace these luxury categories, the latest GST hike is seen as a move by the government to capture more revenue from these booming sectors.

Sneaker Culture in India: A Billion-Dollar Market in the Making

India’s sneaker culture, which was once confined to a niche market, has grown into a booming billion-dollar industry, completely untouched by the pandemic. The sneaker boom is not just about wearing a high-end pair of shoes but also about customisation, rarity, and resale. From the bespoke craftsmanship of custom sneakers to the thriving resale market, sneakers have become a status symbol for a large segment of India’s youth, especially those in urban centers.

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One interesting aspect of this market is the willingness of buyers to pay significant premiums on limited-edition sneakers. For instance, a pair of sneakers by Nike or Adidas that retails for around ₹20,000 in regular stores can be resold for as much as ₹2 lakh in the secondary market.

Take the case of the Air Jordan 1 Mocha, which retailed at ₹15,000 but now commands a resale price of around ₹50,000. In some cases, highly sought-after sneakers, like the Air Jordan I High Travis Scott, which originally retailed for ₹15,000, are now priced above ₹1.5 lakh. Such price increases are not just about brand loyalty but also the limited availability of certain designs and their cultural significance.

The growing culture around reselling sneakers and the enthusiasm of sneakerheads has created a thriving ecosystem of businesses and marketplaces. Companies like Find Your Kicks India and SoleSearch have capitalised on this trend, becoming major players in the Indian sneaker resale market. According to Danish Chawla, co-founder of Find Your Kicks India, the demand for limited-edition releases is so intense that sneakers often sell out within minutes of launching online. "It's not just about getting a pair of shoes; it’s about the hype and scarcity factor," says Chawla, whose platform connects resellers with buyers looking for the most exclusive sneakers in the market.

Luxury Watches: A Symbol of Status and Craftsmanship

While sneakers may dominate the urban youth's fashion scene, luxury watches represent a different kind of opulence. India’s luxury watch market, though smaller in comparison, is equally significant, with increasing demand from the high-net-worth individuals (HNIs) and affluent segments. As with sneakers, the allure of luxury watches is driven not just by the brand but also by exclusivity, rarity, and craftsmanship.

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Watchmakers such as Rolex, Patek Philippe, and Audemars Piguet cater to the top echelon of Indian society, and their timepieces are often seen as a symbol of success and wealth. In fact, some of these watches have become investments, appreciating in value over time due to their limited production and timeless appeal. According to a report by the National Association of Watch and Clock Collectors (NAWCC), the secondary market for luxury watches has grown substantially in recent years, with some rare models fetching prices far beyond their original retail value.

For example, a Rolex Submariner, which retails for approximately ₹7 lakh in India, can easily be resold for double or triple the price in the grey market. Other luxury watches, such as the Audemars Piguet Royal Oak or the Patek Philippe Nautilus, which are often produced in limited quantities, have become coveted possessions among collectors, with some watches fetching several crores in auctions.

In recent years, there has also been a shift toward younger buyers entering the luxury watch market. The rise of digital platforms such as Chrono24 and WatchBox has further fueled the market for rare and pre-owned luxury timepieces in India, making it easier for consumers to access exclusive models and investment-grade watches. The growing number of luxury watch fairs and conventions across major cities like Mumbai and Delhi reflects the increasing interest in these high-end timepieces.

The Impact of GST on Luxury Goods

Both the luxury sneaker and watch markets are highly sensitive to price changes. The proposed hike in GST rates from 18% to 28% on high-end watches and shoes will inevitably raise the prices of these products, making them less accessible to the wider public. However, the impact may not be as severe for the wealthy consumers who typically buy these products.

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In fact, some industry experts believe that the higher taxes may push the demand for luxury items into the secondary market. With resellers already marking up the prices of sneakers and watches, the new GST rates may encourage more consumers to look for these products through alternate channels where the price mark-up is not as steep. In the case of watches, this could mean a rise in the resale of luxury timepieces, where price increases are already common due to the exclusivity factor.

For the government, the higher GST rate is likely to increase tax revenue from these premium categories. The luxury goods market has been expanding rapidly in India, and higher taxes on luxury watches and shoes will ensure that the government captures a larger share of the growing pie.

However, the government also needs to consider the potential impact on India’s luxury sector. Many luxury brands may begin to reassess their pricing strategies, potentially moving some of their more expensive models into a price range just below the ₹25,000 mark to avoid the higher tax bracket. This could lead to more segmentation within the luxury market, where premium brands create more affordable sub-brands or collections to cater to the middle-class consumer.

Conclusion                                                          

The proposed GST rate hikes on luxury watches and shoes signal the government's intent to regulate and capture a larger share of the growing luxury goods market. However, with the sneaker and luxury watch industries already operating in a grey area where resellers thrive, the effect of these changes remains to be seen. Whether these higher taxes will dampen demand or simply encourage more consumers to turn to secondary markets is yet to be determined. What is clear, however, is that India’s luxury market—both in footwear and watches—is maturing rapidly, and the tax changes will play an essential role in shaping its future dynamics.

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