Unlocking the potential of the GIFT City: What it entails for an entrepreneur & Promoter

The Gujarat International Finance Tec-City (‘Gift City’) has been set up as India's first operational smart city and International Financial Services Centre (IFSC) located in the State of Gujarat.

The IFSC is envisioned as a world-class zone dedicated to offering financial services to non-residents and certain residents in foreign currency and to handle the international flow of financial products and services, specifically targeting non-residents.

Classified as a Special Economic Zone (‘SEZ’), the GIFT City is designed to compete with other similar international financial centers located in Dubai, Singapore, and Hong Kong.

?Some of the key attributes of the GIFT city are as under:

Features

• SEZ accorded Status: The Gift City is designated as an SEZ and entitles fiscal incentives and benefits to businesses that have housed its operations within.?
• Unified Regulator and single window clearance: The regulatory environment in GIFT City is governed by the International Financial Services Centre Authority (‘IFSCA’), which combines the powers of the RBI, SEBI, IRDA, PFRDA.?
• World class infrastructure and proximity to hubs: It has state-of-the-art infrastructure suitable to meet the needs of international financial services. The city is well-connected with major cities in India and globally through air, road, and rail networks and is in vicinity of Gandhinagar and Ahmedabad.
• Competitive tax regime and incentives and availability of State subsidies in the form of lease rentals, PF contribution, electricity charges.

• Competitive tax regime and incentives and availability of State subsidies in the form of lease rentals, PF contribution, electricity charges.

Advantages/Incentives for units in the IFSC

Tax Benefits: Businesses in Gift City can benefit significantly from tax incentives and exemptions, including income tax holiday, which provide for a 100% profit-linked deduction for 10 out of a block of 15 years of operation. Additionally, the following incentives are also available: -

• Lower Minimum Alternate Tax (MAT) rate of 9% vis a vis 15% in other areas.
• No Customs duty on goods imported in IFSC from outside India.
• No GST on supplies or services made to offshore clients or other IFSC/SEZ units or received by an IFSC unit. ?
• Stamp duty exemption or reimbursement on real estate transactions.
• Dividend income received by a non-resident from a unit in an IFSC is taxable at a lower rate of 10%.
• Interest payable to a non-resident by a unit located in an IFSC in respect of monies borrowed by it on or after the first day of September 2019 is tax-exempt.

The above translates into significant tax savings, boosting the Company’s bottom line and fueling further growth.

• Ease in doing business: The regulatory environment is designed to minimize bureaucratic hurdles and ensure smooth functioning of operations, thus making it easier for businesses to set up and operate.
• Global Connectivity: With its international focus and strategic location, Gift City facilitates global connectivity and enhances India's position in the global financial landscape.
• Job Creation: It promotes employment generation through the establishment of financial and related services, attracting skilled professionals from various fields.

Sectors with potential opportunities

The Gift City is primarily targeted towards businesses and institutions involved in international financial services with the objective of bringing back financial services transactions presently being carried out overseas by both overseas and Indian financial institutions. The target audience would comprise: -

• Financial Institutions: Banks, insurance companies, asset management firms, etc.
• Capital Markets: Stock exchanges, brokerage firms, investment banks, etc.
• Service Providers: Legal firms, accounting firms, consulting firms specializing in financial services, etc.
• Aircraft & ship leasing business.
• Fintech.

Some of the fast-emerging business segments are: -

• Global inhouse centers.
• Payment service providers.
• Foreign Universities; and
• Global & regional treasury centers.
• Both domestic and international firms can set up operations in Gift City.?

It has been seen that family offices are gaining prominence amongst wealthy families and HNIs to manage and preserve their wealth. They also offer substantial capital for investments globally. The?Fund Management Entities (FMEs) Regulations?provide a regulatory framework, which allows wealty families and HNIs to set up their own family office in the form of a FIF in the IFSC.

An FIF is a self-managed fund pooling money only from a ‘single family’.

FIF in GIFT City provides for the following advantages

• Diversified Portfolio: The fund can invest in a diverse range of assets, including equities, bonds, commodities, real estate investment trusts (REITs), and alternative investments.
• Tax Benefits: Funds operating within GIFT City enjoy tax advantages such as exemptions from securities transaction tax (STT), commodities transaction tax (CTT), and dividend distribution tax (DDT).
• Global Connectivity: Access to global markets and investors facilitated through GIFT City's international connectivity and ease of capital movement.
• Wealth Management: Efficient wealth management solutions for high-net-worth families seeking diversification and asset protection.
• Estate Planning: Facilitates succession planning and intergenerational wealth transfer through structured investment vehicles and tax-efficient strategies.

Establishing a Family Investment Fund in GIFT City leverages India's robust regulatory framework, tax incentives, and strategic location to create a platform for global investment opportunities. With its supportive ecosystem and regulatory clarity, GIFT City positions itself as an ideal hub for family offices and investment funds looking to capitalize on India's economic growth and emerging market potential.

KGS’s corner: What we can help you with

Recognizing India’s strategic location, robust economy, growing international trade, abundant talent pool, and the urgency for accelerated economic growth, the Government of India will continue to bolster its support to the GIFT city.

Firms in Gift City benefit from a combination of fiscal incentives, a favourable regulatory regime, excellent infrastructure, global connectivity, and opportunities to thrive in a specialized financial services hub. These factors collectively contribute to making Gift City an appealing destination for domestic and international businesses looking to expand their footprint in India's burgeoning financial and technological landscape.

KGS stands committed in assisting businesses and investors to efficiently navigate the dynamic environment of the IFSC – GIFT City, fostering growth and aiding in India’s vision of becoming a global financial hub and would partner by providing the following services to: -

• Accounting and auditing services, compliance and secretarial services, bookkeeping services.
• Tax and Regulatory Compliance: Assistance in navigating the complex tax and regulatory environment of the IFSC, ensuring compliance with the Income-tax Act and other extant regulations.
• Investment and Strategic Planning: Expertise in sectors like Banking, Insurance, FinTech, and Capital Markets, providing tailored investment strategies and insights.
• Legal and Compliance Support: Guidance through the evolving legal landscape, particularly in understanding and adhering to IFSCA (Finance Company) Regulations.
• Comprehensive Business Solutions: For FinTech and Family Management Entities, providing end-to-end solutions including regulatory guidance and operational setup.

For more information contact [email protected], +91 9810 766808.