Home Away from Home

You would normally not associate a Middle East country to be among the most welcoming places for expatriates to work. Surprisingly, the tiny Persian Gulf country Bahrain ranks as the most hospitable for expatriates.

This was the finding of a new survey of 3,100 expatriates conducted by HSBC Bank, wherein respondents were asked to rate 23 factors related to their quality of life, including...

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital Access

Subscribe

Moneylife Magazine Subscriber or MAS member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
Life   Exclusive
Imported luxury goods may get a boost from FTWZs

Officials from the high-end luxury goods industry are looking at FTWZs as a profitable option. A few of them are positive that price benefits derived from these zones would be passed on to customers

Free-trade warehousing zones (FTWZs) are expected to benefit most of the players across various segments in India. However, the high-end or luxury items segment could benefit the most from such zones. Industry officials also expect a relief in the prices of such products.

“The net cost of high-end luxury products could be brought down by around 5%-7% through such zones. However, it is entirely upon the client if he will pass on this benefit to customers or not,” said Nijay N Nair, Strategic Initiatives, Arshiya International Ltd. The company is planning the first FTWZs in India.

Sudip Majumder, CEO, Acme Consultants Pvt Ltd, who has been instrumental in bringing ‘O2 Sparkling Vodka’—a high-end liquor—to India, said that these zones would help. “This will definitely help save a considerable amount. Surely, the proposed FTWZs at Mumbai, Delhi and Nagpur will make things more comfortable and profitable. With Mumbai and Delhi being the main hub and Nagpur being the central part of the country, these zones will definitely help importers. High-end customers will also get some amount of benefit on product prices,” said Mr Majumder.

“It will benefit customers. When my investments are lower, finance cost is definitely lower and I will pass it on to my customers. It will help as the investment on import duty is divided into small amounts depending on the demand and not at one stretch,” said Sarat Kumar Parsan, head, Parsan Brothers. Parsan has been involved in the import of alcoholic beverages.

FTWZs are zones created near a port or a hinterland, which allow duty-free storage of imported goods. The client using this space will have to pay the import duty on these goods once they are moved out of the FTWZ. The zone also provides space for assembling products.

Imported luxury items in India at present have to pay high import duty, ranging anywhere between a low of 24% to a high of 150% depending on the product being imported. A considerable inventory of such imported items has to be maintained in order to cater to the client on time.

However, if the maintained inventories fail to find a market within a suitable period, they have to be re-exported. Goods which have been re-exported qualify for a duty refund. However, the duty-refund period could be as long as six months. Thus, the amount paid as high import duty is locked in for a long period and is unavailable as working capital. “These zones help in duty deferrement and a large working capital would be available,” added Mr Parsan.

For an import duty of 24% on a luxury watch costing around Rs5 lakh, the amount paid is Rs 96,777. Typically, an inventory of 500 watches is maintained with an average holding period of 60 days. Thus, you spend Rs4.80 crore as duty to maintain an inventory of 500 watches.

If these watches are not sold in the given 60-day period, they are re-exported to some other market where there is a demand for such products. Assuming a six-month period for duty refund of Rs 4.80 crore, this translates into working capital of Rs 4.80 crore blocked for that period. “The interest that can be earned on this amount for a period of six months assuming a working capital return of 20% is around Rs8 lakh,” added Mr Nair.

The savings could be higher on high-end products with a high import duty of 150%. Taking a high-end tax of 150%—for a wine bottle that costs around Rs50,000—the duty paid is Rs 30,000. To maintain a modest inventory of 2,000 bottles you spend Rs6 crore. This working capital, if not blocked for six months, could earn around Rs15 lakh as interest.
 

Like this story? Get our top stories by email.

User

COMMENTS

Bruno Mediati

9 years ago

Could you kindly reconfirm if this gentleman,Sudip Majumder from Acme Consultants is located at
ACME CONSULTANTS
C-407 SIERRA TOWER
LOKHANDWALA TOWNSHIP
KANDIVALI EAST
MUMBAI
PIN : 400101
INDIA.
HANDPHONE : +919892334488
He is interested in our Cider but his info is not 100% copliant with international standards.The person I am emailing does not appear to be the same person as in your article. Maybe I am wrong.But it does not hurt to be safe.Hope you could help.
Tks
Bruno Mediati

Fund Codes

Joshua Brown, who runs a great blog at www.thereformedbroker.com, has decoded the various categories of mutual funds, after 14 years of observation. Here is his interpretation of what a fund brochure says and what it means. He has asked investors to use this as a guide to evaluate funds.

Ultra Funds: Leveraged to the hilt.
Global Growth Funds: Fund managers chase stocks in markets...

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital Access

Subscribe

Moneylife Magazine Subscriber or MAS member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

online financial advisory
Pathbreakers
Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
online financia advisory
The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Online Magazine
Fiercely independent and pro-consumer information on personal finance
financial magazines online
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
financial magazines in india
MAS: Complete Online Financial Advisory
(Includes Moneylife Online Magazine)