India in recent years has experienced substantial economic growth making it a promising destination for foreign investments in India. The initiatives undertaken by the government like ‘Make in India’, ‘Digital India’, and ‘Ease of Business’ have eventually boosted the economy thereby, creating a conducive environment for businesses. To further expediate & foster this growth and advancing towards financial globalization, India’s first International Financial Services Centre (“IFSC”) is set up in the form of Gujarat International Finance Tec-City (“GIFT City”) at Gandhinagar. GIFT City stands as a beacon of opportunity for businesses and investors, offering a wide array of advantages. Beyond its globally competitive environment marked by advanced infrastructure and cutting-edge technology, GIFT City Gandhinagar provides a solid foundation through robust regulatory frameworks.
Regulatory Framework in GIFT City Gujarat
Setting up a business in GIFT City Gujarat calls for understanding the regulatory framework within GIFT City. Before we divulge into the Regulatory Framework of GIFT City, let us understand the concept of Special Economic Zones (“SEZ”) and the International Financial Services Centre (“IFSC”) in India.
SEZ is an area in a country that is designed to generate positive economic growth with an aim to attract Foreign Direct Investment (“FDI”) and improve the economy by exporting products and services and finding markets globally.
IFSC provides a wide range of financial services like stock exchanges, trading members, corporate banking, economic commercial borrowing, lending, general insurance, life insurance, portfolio management services, and risk management.
GIFT City is the first IFSC in India and to make it all the more alluring and enticing the Government of India also declared it as a SEZ.
GIFT City: Both SEZ & IFSC
GIFT City Gujarat or any subsequent IFSC is a strategic idea designed by the Government of India also required a well thought out regulator. To govern and regulate IFSC the Government of India hence established a Unified Regulator named International Financial Services Centres Authority (“IFSCA”), which encompasses regulatory powers of four financial services regulators in India namely Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), Insurance Regulatory Development Authority of India (IRDAI), Pension Fund Regulatory & Development Authority of India (PFRDAI) vested in IFSCA with respect to regulation of financial institutions, financial services and financial products in the IFSC, making it a unified regulator for the IFSC.
GIFT City being both an IFSC & SEZ is governed by the IFSCA & SEZ Authority.
Setting up in GIFT City Gujarat
With a vision to create an epicentre for Indian and global financial and IT businesses, GIFT City Gandhinagar is a pre-eminent, futuristic city built on the foundation of sustainability which makes it even more attractive for the international as well as domestic businesses to set up in GIFT City.
With an unprecedented ecosystem for crucial economic activities combined with globally benchmarked regulations, taxation, policies, etc, the following businesses/services will reap numerous benefits in incorporating or setting up in GIFT City
Business/ Services in GIFT City:
- IT & ITES
- Capital Market
- Ship Leasing
- Aircraft Leasing
- Ancillary Services (like Legal, Audit, Compliance, Taxation, Accounting, Management Consultancy, etc.)
Other Businesses Providing Services in GIFT City
The entities having an export business of the following services can set up units at GIFT SEZ.
- Research and development services
- Computer software services, including information-enabled services such as back-office operations.
- Call centers
- Content development or animation
- Data processing
- Engineering and design, graphic information system services
- Human resources services, insurance claim processing
- Legal databases, medical transcription
- Payroll, remote maintenance
- Revenue Accounting
- Support centers and website services
- Off-shore banking services
- Professional services rental/leasing services without operators
- Other business services, courier services
- Audio-visual services, construction and related services
- Distribution services (excluding retail services)
- Educational services, environmental services, financial services, hospital services, other human health services
- Tourism and travel-related services, recreational, cultural and sporting services
- Entertainment services
- Transport services, services auxiliary to all modes of transport, pipelines transport
Benefits of Incorporating a Business Entity in GIFT CITY IFS
Recently entities including US-based Tech Giant Google shared its plans to set up Alternative investment funds in the GIFT city which being a special economic zone offers relaxation to investors. The benefits are enumerated below:
Infrastructure And Administrative Benefits GIFT City
- Unified Regulator & Single Window Clearance: Unified regulator IFSC Authority provides single window clearance, IFSC units can take all necessary approvals under one umbrella (allotment/planning/ construction/occupancy) which is useful for IFSC units to set up business in an easy manner.
- Setting up: Plug & play infrastructure, facilitating quick and hassle-free business setup with all the infrastructural clearances in place.
- Cost efficiency: Sustainable development model with a potential 20% reduction in operating costs.
- Liberal Policies: Deemed foreign jurisdiction from an exchange control perspective and therefore non- non-applicability of various complex domestic policies.
|A. Income Tax Benefits|
|For the IFSC Units
|For the Investors
|B. Goods & Service Tax (“GST”) Benefits|
|For the IFSC Units
No GST on services:
GST applicable on services provided to Domestic Tariff Area under Reverse Charge Mechanism.
|For the Investors
No GST on transactions carried out in IFSC exchanges.
|C. Other Taxes & Duties benefits|
|For the IFSC Units
||For the Investors
State Subsidies/ Incentives UNDER GUJRAT IT/ITES POLICY
Note: This Benefit is available exclusively to Information Technology/ Information Technology Enabled Services Companies (“IT/ITES Companies”) in the state of Gujarat.
General Incentives to IT/ITES Companies
Employment Generation Incentive (“EGI”)
A one-time EGI of 50% of one month’s Cost to Company (“CTC”) upto INR 50,000 per male & INR 60,000 per female employee is provided. It is applicable only if a new local employee is hired & retained for a minimum 1 year.
Atmanirbhar Rojgar Sahay (“ARS”)
Reimbursement of employer contribution to Provident Fund upto 12% for 5 years (100% for female employees; 75% for male employees). This benefit is available even for employees working from home within Gujarat.
15% of OPEX (available for 5 years), subject to a maximum upto INR 40 crores per year if Gross Fixed Capital Investment (GFCI) is more than or equal to INR 250 crores or upto INR 20 crores per year if GFCI is less than 250 Crores.
25% of Eligible CAPEX (one-time) is subject to a maximum upto INR 200 crores if Gross Fixed Capital Investment (“GFCI”) is more than or equal to INR 250 crores or upto INR 50 crores if GFCI is less than 250 Crores.
- Power Subsidy: No Electricity Duty for 10 Years.
- Interest Subsidy: Subsidy at 7% on term loan or the actual interest paid whichever is lower, subject to a maximum INR 1 Crore per annum, for 5 years from the date of start of actual interest payment if the loan is availed from the Indian Branch of Indian Financial Institution.
Special Incentives to Specific IT/ITES Companies
- IT City/ Township/ Facilitating Infrastructure.
- Cloud System for Cable Landing System (“CLS”).
- Developers of Data Centre Projects.
- Support for R&D Institutes / R&D centres established by recognised educational institutes.
The GIFT City is envisioned to provide a platform for domestic and international businesses, fin-techs, and start-ups to expand globally and access capital. It is not just about creating a financial centre; it is also about building an ecosystem that promotes innovation, investment, entrepreneurship, and collaboration.
It would be interesting to witness what the future unfolds for GIFT City and how Indian businesses will connect with global markets and access cutting-edge financial services in GIFT City and also how foreign businesses with an opportunity to establish a presence in India will tap the mode of GIFT City.