Swatch Group (India) Pvt Ltd, the Indian subsidiary of the world's largest watchmaker, will break even in the next two years, said G Kannan, country manager, Swatch India, provided the government rationalises the tax structure for imported watches.
Currently, Swatch watches, like all imported watches, attract a basic customs duty of 15 per cent, a countervailing duty of 16 per cent on 65 per cent of MRP, apart from local taxes, octroi and educational cess, taking the total tax component to 70 per cent.
"Since we cannot have the prices in India higher than elsewhere, the company has to take the maximum hit," said Kannan.
The All India Federation of Horological Association, of which Swatch is a member, has asked the government to review the duty structure.
While recommending that the basic customs duty be reduced to 5 per cent, the association has also asked for the abatement factor in the CVD to be increased from 35 per cent to 50 per cent.
The duty structure in India is also not in sync with other Asian markets, Kannan added. In Dubai, watches attract an import duty of just 5 per cent, as they do in Singapore and Thailand.
The recommendations, if accepted, would not only bring Swatch's India operations near break even, but also spur growth in the Rs 500-600 crore (Rs 5-6 billion) Indian luxury watch market (watches priced above Rs 25,000), which is growing at 20 per cent a year, he said.
The Indian subsidiary of Swatch Group was set up four years ago and has been growing at more than 20 per cent for the last few years. The company, which refused to divulge revenue or investment figures, expects a similar growth this year.
Swatch has already introduced six of its 18 international brands in the country and plans to launch top-end watch brand, Blancpain, this year. Nayla Hayek, daughter of Swatch Group's global head Nicholas Hayek (Sr), will soon join Swatch India's board of management.
Omega, another Swatch brand, recently appointed Abhishek Bachchan as its male endorser. Swatch has outlined retail expansion, including setting up of more exclusive boutiques and retailing Breguet, the top-end brand introduced last year, beyond Delhi, in Mumbai and Bangalore.
