India to get its first International financial services center(IFSC).
What is IFSC?
IFSC stands for International financial services center. An IFSC caters to customers outside the jurisdiction of the domestic economy. Such center’s deal with flows of finance, financial products and services across borders. London, New York and Singapore can be counted as global financial centers. Many emerging IFSCs around the world, such as Shanghai and Dubai, are aspiring to play a global role in the years to come.
Gujarat International Finance Tec-City (GIFT City) would be the country's first IFSC, with which top bourses BSE and NSE signed MOUs for setting up International exchanges there. However, BSE already started India International exchange on January 9, 2017.
IFSC could be sent up in a special economic zone (SEZ) or the central government can approve the setup of IFSC. Although there are certain requirements for this setup such as
Rational legal regulatory framework, developed infrastructure, stable political environment, sustainable economy and so on.
What services could the International financial services center provide?
Some of main features of IFSC are
Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial intermediaries, accountants and law firms. Global and regional corporate treasury management operations that involve fund-raising, liquidity investment and management and asset-liability matching.
Many companies such as insurance and mutual funds, Wealth management and asset management will be able to have their setup. Other services such as merger and acquisition and trans-national Corporation, fundraising services for individuals, corporations and government could be done.
Many commercial banks could open their offshore units in the special economic zone, such unites can trade in foreign currencies in overseas markets. These units can also raise funds in foreign currency and deposit and borrowings from non-resident sources and provide loans and liability’s products for clients.
Benefits of IFSC:
India has many restrictions on the financial sector, such as partial capital account convertibility, high statutory liquidity ratio requirements and foreign investments restrictions.
During development and construction operation stage : exemption from Custom Duty & Excise Duty
Central Sales Tax, Service Tax, Exemption from Securities transaction tax, leviable under sec. 98 of Finance (No. 2) Act, and 2004, Commodity Transaction Tax, Long-term capital gain tax and Dividend
distribution tax Exemption from VAT, Stamp duty etc. as per State Govt. Policy.
Income tax Holiday : For First 5 years- 100% of eligible profits or gains. For Next 5 years- 50% of eligible profits or gains.(Exemption U/s. 80LA -No sunset clause).
MAT : MAT is applicable at the rate of 9% (As per Union Budget 2016)- Surcharge, cess extra
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Ashutosh Gedamkar
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Skype id: agedamkar.tvmarkets