Activity in the Gujarat International Finance Tec (GIFT)-City has been picking up pace over the last two years. Incentives in the Budget now will further boost its progress. The International financial Services Centre (IFSC) in the GIFT city was intended to act as a financial services hub which aids inbound and outbound financial services transactions of domestic businesses.
While the progress was slow in the initial years, steps such as tax incentives, establishment of an independent regulator, IFSCA, and relaxations provided by the Reserve Bank of India, Securities and Exchange Board of India and other regulators have propelled GIFT city ahead. Around 31 banks, more than 80 capital market intermediaries, 37 insurance and reinsurance companies, 55 fintech companies and more than 140 alternative investment funds have begun operations in the IFSC, as of last November. Select activities such as fund raising through global bond issuances, insurance, gold imports through the bullion exchange and aircraft leasing have picked up in recent months.
The relaxations in the Budget are expected to help the GIFT IFSC ecosystem. Extension of the sunset date to 2030 for claiming 100 per cent deduction from income tax for the first five years and 50 per cent for the next five years, will be particularly beneficial. With interest in the GIFT City beginning to grow, extending this benefit will ensure that more companies set up shop here. Transfer of units or shares of an offshore alternate investment fund to an AIF located in the GIFT IFSC is tax exempt in the hands of the shareholder. The scope of this dispensation has been expanded to include exchange traded funds and retail schemes. This will help relocation of funds from other jurisdictions such as Mauritius and Singapore into India. Simplified rules for fund managers operating in the IFSC, giving them more time to comply with regulatory requirement, will considerably improve the ease of doing business in the IFSC. Clarification that proceeds from life insurance policy issued by an insurance company situated in IFSC shall be exempt without the condition relating to the maximum premium payable, aligns insurance policies sold in the IFSC with domestic insurance policies. Bringing ship leasing activities on par with aircraft leasing, in taxation of capital gains and dividend paid to subsidiaries and SPVs, is expected to boost leasing of ships from this centre.
The GIFT City has moved to 52nd rank in global financial centre index, out of 121 global offshore centres. The monthly turnover of registered entities in the IFSC has been around $102 billion last year while cumulative banking transactions reached $975 billion last November. Indeed, the cornerstone of governance in offshore financial centres is light touch regulation and easy entry and exit rules. Awareness on opportunities in the GIFT IFSC must be increased among domestic investors.
