Gujarat International Finance Tec-City Company Limited (GIFTCL) has established “GIFT SEZ Limited” to develop Gandhinagar Multi-Service SEZ with a primary emphasis on the growth of IFSC and related SEZ businesses. To have IFSC status (International Financial Services Centre), local finance centers, and the linked social infrastructure.
By setting up an International Financial Services base, the goal is to build a world-class smart city that will serve as a global financial base. The government is also trying to bring financial activities and services that are currently done in overseas financial hubs by local businesses and foreign offices or units of financial institutions (FIs), International Universities to India.
The GIFT City IFSC offers a number of benefits to investors in the foreign financial field. These benefits have become more unique and competitive over the last two years. Some taxes, like capital gains tax, income distribution tax, and goods and services tax (GST), don’t have to be paid by companies that work in the IFSC. This was made possible by recent changes to the tax code.
Tax experts say that under foreign treaties, Category III Alternative Investment Funds (AIF) that are set up in IFSC GIFT City should pay no tax on trading bonds and no tax on trading derivatives.
The GIFT City IFSC is a great value for the financial services industry because it gives all business units and investors a single point of clearance and a number of tax breaks.
But there are some short-term problems to think about, like competition from Singapore and Dubai, fast-changing financial markets that need regulators to act quickly, and the need for clear rules about which laws apply and which courts have authority in case of a disagreement.
Financial benefits to IFSC units
- Income Tax Benefits Units in IFSC: 100% tax relief for 10 out of 15 years; IFSC Units can choose any 10 out of 15-year block
- MAT/AMT at 9% of book earnings applies to firms and other units set up in IFSC. MAT does not apply to businesses in IFSC that choose the new tax system.
- Dividends paid by a company to its investors in an IFSC: Income from dividends paid by a company in an IFSC will be taxed beginning on April 1, 2020.
- Investors: (i) Loans to IFSC units: Interest income paid to non-residents is not taxed. (ii) Long-term bonds and bonds with a value in rupees that are listed on IFSC markets are taxed at a lower rate of 4%.
- When a non-resident of India moves these gains into certain assets listed on IFSC markets, they are not taxed in India.
Investors:
Interest income paid to non-residents on:
(i) Money lent to IFSC units is not taxed.
(ii) Long-term bonds and bonds with a value in rupees that are listed on IFSC markets are taxed at a lower rate of 4%.
Transfer of certain securities* listed on IFSC markets by a non-resident is not considered a transfer. Gains from these securities are not taxed in India.
The Goods and Services Tax (GST) helps IFSC units: No GST on services:
- Received by a company in the IFSC.
- Given to IFSC/SEZ companies and offshore customers. GST applies to services given to investors in the Domestic Tariff Area: IFSC exchange deals don’t have to pay GST. Taxes and other fees
- Units in the IFSC include State Subsidies, including rent, PF contributions, and power costs.
Investors Exemption from Security Transaction Tax (STT), Commodity Transaction Tax (CTT), stamp duty in respect of transactions carries out on IFSC exchanges at Gift City.
Operational Benefits:
- The SEZ Act says that IFSC Units don’t have to follow currency control rules because they aren’t residents. Even though the Foreign Exchange Management Act of 2002 (or “FEMA”) was passed, units in IFSC can still use the benefits of being a non-resident.
- The Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations of 2004 (the “ODI Regulations”) have been changed to let Indian residents work with foreign financial services firms. As of May 12, 2021, the RBI will let an Indian party support payments to an Alternative Investment Fund (AIF) set up abroad, including IFSC. This will allow Indian people to set up and spend funds in GIFT City.
Benefits of opening a business in GIFT City
- Ease of doing business: Single window clearance, all approvals under one roof for selection, planning, building, and occupation. The state of Gujarat does not have to pay stamp tax or licencing fees.
- Benefits: The state of Gujarat gives benefits for growth, and the plan of payouts is tied to development. Plug-and-play hardware must be set up. • Comparable cost efficiency: a 20% drop in operating costs and a model for sustainable growth.
- The Gujarat IT/ITeS Policy offers benefits, such as paying back EPF, helping with lease rental costs, and paying for power.
- Recruiting: IIM Ahmedabad, MICA, CEPT University, GMU, Entrepreneurship Development Institute of India, National Institute of Design, NIRMA University, NIFT, Gujarat National Law University, Pandit Dindayal Energy University (PDPU), Lalbhai Dalpatbhai College of Engineering, NIPER-A (National Institute of Pharmaceutical Education and Research).
What Are the Services Rendered In GIFT City?
Gift City was created to make doing business simpler for banks, insurance firms, and stock exchanges. There are the following services available:
- To generate revenue for individuals, corporations, and governments.
- Pension funds, insurance firms, and mutual funds manage and spread their assets globally.
- Global tax management.
- Corporate cash management operations.
- Risk management operations such as insurance and reinsurance.
- Acquisitions and mergers of enterprises from other nations.
Process for Setting up IFSC Unit in GIFT SEZ-IFSC is as follows
- Submission of Interest Letter / Mail by the organization for taking up space in incubation facility at GIFT SEZ for setting up unit in GIFT SEZ-IFSC as per the prescribed format.
- GIFT SEZ will give the Proposal to the applying organization for taking up space in incubation facility in GIFT SEZ.
- The organization to provide the confirmation/acceptance for the Proposal sent by GIFT SEZ.
- Post confirmation, GIFT SEZ will issue Provisional Letter of Allotment (PLOA) to the organization for providing office space for setting up IFSC Unit in GIFT SEZ.
- Organization to submit application (Form-F) to Development Commissioner, KASEZ for taking approval for setting up IFSC Units in GIFT SEZ along with the relevant documents including PLOA issued by GIFT SEZ.
- Simultaneously, application to the concerned Regulator (RBI/SEBI/IRDA) for required license to operate as IFSC Unit in GIFT SEZ under the applicable regulations for banking/capital market /insurance.
- On approvals from DC, KASEZ and Regulator, GIFT SEZ to issue Final Letter of Allotment for allocation of space in GIFT SEZ for carrying out the approved operations.
- The approved Units shall have to execute lease deed/Leave and License with the Developer or Co –developer as the case may be for the allotted space.
The above mentioned is the procedure for establishing / Incorporating an IFSC unit at GIFT SEZ IFSC.
The entities which can open IFSC unit are as follows:
- Banking Sector – Regulated by Reserve Bank of India (RBI)
- Indian banks (viz. banks in the public sector and the private sector authorised to deal in foreign exchange)
- Foreign banks already having presence in India
- Insurance Sector – Regulated by (IRDAI)
- Indian Insurer
- Indian Reinsurer
- Foreign Reinsurer
- Capital Market – Regulated by Securities & Exchange Board of India (SEBI)
- Stock Exchanges / Commodity Exchanges
- Clearing Corporation
- Depository
- Broker
- Investment Adviser
- Portfolio Manager
- Alternate Investment Fund
- Mutual Fund
- Indian Broker
- Foreign Insurer
Who should set up a unit at the GIFT City?
Offshore banking
- Borrowing and lending
- Deposits
- External commercial borrowing and trade finance
- Trading and clearing member.
- Derivative products
Offshore insurance
- Alternate investment funds or AIFs
- Portfolio management services (PMS)
- Investment advisors (IA)
- Wealth management
- Fund accounting
- Trustee services
- Depository and custodian services
Capital markets
- Derivatives trading – equities, index, currency, commodities
- Trading and investments
- Debt listing
IFSC insurance
- Direct insurance
- Reinsurance
- IFSC insurance intermediaries
Allied / ancillary services
- Global-in-house centers or GICs
- Accounting and audit services
- Legal and taxations services
- Trusteeship services
- Management consulting services
- Compliance and secretarial services
Emerging IFSC businesses
- Aircraft leasing and financing
- FinTech
- International Bullion Exchange
- Finance company
IFSC Banking Units are viewed in the same way as their foreign branch. The specifics of the principal businesses that IBUs do are as follows
- Buyer’s Credit
- Loan Syndication
- JV/WOS funding
- ECB
- FDI
- Inter Bank Lending / borrowing
Just For Information: –IFSC Banking Units have crossed business transactions of around US$ 18 bn (as of March 2019).
Some of the biggest players in the financial services have set up their operations in the GIFT-IFSC. These include: National Stock Exchange(NSEIFSC), Bombay Stock Exchange ( IndiaInx ), IIBX, SGX.
Location appeal
- GIFT City, which is situated on the banks of the Sabarmati River between Ahmedabad and Gandhinagar, is the result of the state’s planned tri-city strategy.
- In order to promote commerce, industry, exports, international finance, and foreign investment, each of the three regions—GIFT City, Ahmedabad, and Gandhinagar—has a unique supporting ecology.
- 20 mins from Ahmedabad International Airport
- Along National Highway 48 (Delhi-Mumbai Industrial Corridor)
- Metro connectivity to Ahmedabad
- 15 mins from nearest railway station
- 15 mins from high-speed rail, approved by the central government (under construction)
Competitive with other global financial centers
GIFT City IFSC is at par with other financial centers in the following ways:
- Unified regulatory authority
- Competitive tax regime comparable to treaty jurisdictions like Singapore and Mauritius
- Relaxed company law
- Strategic time zone
- International arbitration center
For Set-up of Unit in Gift city you can reach us for any query.
FAQ
What is Gift City SEZ?
- SEZ is an area designated in Gift city where you may set up units to carry specific manufacturing and trading activities and provide certain services.
- It is considered a foreign territory which means that you need to treat the goods and services going into SEZ as exports and goods and services coming from the SEZ as imports.
- An SEZ aims to boost the economy by exporting certain goods and services.
What Are The Benefits In GIFT City?
Government of India along with Government of Gujarat have provided a slew of benefits to the entities setting up the GIFT City. These incentives range from exemption of registration fee and stamp duties to tax benefits. Details of the benefits in Gift City are set out herein below:
Fiscal Benefits to IFSC units:
What is Income Tax Benefits here in Gift City IFSC ( IFCA )
Units in IFSC GIFT:
- 100% tax exemption for 10 years out of 15 years
- IFSC Unit has the flexibility to select any 10 years out of 15 years block
- MAT / AMT @ 9% of book profits applies to Company / others setup as a unit in IFSC – MAT not applicable to companies in IFSC opting for new tax regime
- Dividend paid to shareholders of company in IFSC: From 01 April 2020, dividend income distributed by Company in IFSC to be taxed in the hands of the shareholder.
Investors Benefits at GIFT IFSC:
- Interest income paid to non-residents on: (i) Money lent to IFSC units not taxable. (ii) Long Term Bonds and Rupee Denominated Bonds listed on IFSC exchanges taxable at a lower rate of 4%
- Transfer of specified securities* listed on IFSC exchanges by a non-resident not treated as transfer – Gains accruing thereon not chargeable to tax in India
- The Goods and Services Tax (GST) helps IFSC units:
No GST on services:
- Received by a company in the IFSC.
- Given to IFSC/SEZ companies and offshore customers.
- GST applies to services given to investors in the Domestic Tariff Area: IFSC exchange deals don’t have to pay GST.
What Are the Services Rendered In GIFT City IFSC ?
Gift City was created to make doing business simpler for banks, insurance firms, and stock exchanges. There are the following services available:
- To generate revenue for individuals, corporations, and governments.
- Pension funds, insurance firms, and mutual funds manage and spread their assets globally.
- Global tax management.
- Corporate cash management operations.
- Risk management operations such as insurance and reinsurance.
- Acquisitions and mergers of enterprises from other nations.
Call Us For more details and get the Set-up done at low cost and Pay in EMI.
