Budget 2013: Luxury cars, bikes, phones to be expensive for super rich

The super rich in India will not only have to pay higher taxes on their income, they will also shell out more for their Lamborghinis, Harleys and iPhones as finance minister P Chidambaram proposed to increase taxes on luxury cars, SUVs, super bikes, smartphones, yachts and luxury homes.


He didn’t even spare the cigar. “I am confident when I ask (them) to bear a small burden for one year they will do so cheerfully,” he said in his speech, also referring to Azim Premji’s recent statement supporting the idea of taxing the super rich. “This is no big deal,” responds Dr Anand Burman, chairman, Dabur India.

“It’s absolutely okay and a rational move because the finance minister has to raise money from somewhere. And, if a guy has the money to import a luxury car, he will have money to pay the additional 25% duty as well.”

Others are still working out the implications. “I will have to consider how much to spend on my personal philanthropy,” says Swati Piramal, vice chairperson, Piramal Enterprises.

“I hope the revenue the government collects from this taxation goes into a well-managed government scheme to lift the economy. Personally, I would like it to go into education or healthcare.”

Besides taxing the super rich more, Chidambaram has increased import duties on yachts, top-end cars and high-end motorcycles, arguing that the rich “will not mind paying a little more.” Wealth managers say this may not curb spending by the super rich.

“The rich do feel bad about more money being taken away from them but it will not change their consumption pattern or lifestyle,” adds Jaydeep Hansraj, business head, Kotak Wealth Management.

“Usually, such measures do not impact luxury spends,” says a top-end car dealer in Delhi. But some luxury merchants are anxious. “This (higher import duty on yachts) will have a severe impact,” says Anju Dutta, MD of Marine Solutions, a Mumbai-based company that sells imported boats and yachts of over 10 brands. “It’s like killing an industry on birth.”

The total import duty on yachts is about 29%, which is a mix of base customs duty and countervailing duties. The base duty has been increased to 25% from 10%. A speedboat can cost Rs 1.5 lakh to Rs 1 crore, while a 50-feet luxury yacht costs about a million euro. There are nearly 25 yacht owners in India, mostly big businessmen.

(Vijaya Rathore, Ahona Ghosh and Ravi Teja Sharma)