Gujarat International Finance Tec-City (GIFT City) is a planned business district in Gujarat, India. It is the new business destination offering competitive edge to Financial services and Technology related activities.
This article helps you understand GIFT city’s structure, permissible services, and tax benefits.
What Is GIFT City?
GIFT City is a multi-service Special Economic Zone (SEZ) with an International Financial Services Centre (IFSC) and a local financial centre. It is India’s first operational greenfield smart city and international financial services center, promoted by the Government of Gujarat as a greenfield project.
With the creation of an International Financial Services Centre, the goal is to create a world-class smart city that will become a worldwide financial hub. The government is also attempting to bring financial services and transactions to India that are now carried out in offshore financial centres by local corporate entities and overseas branches or subsidiaries of financial institutions (FIs).
GIFT City is equipped with some of the latest technology known to man. From the latest public transport, state-of-the-art infrastructure to automated waste collection to an efficient district cooling system, Gift City is an ideal environment for you to set up your business.
Related read: GIFT City – An Overview and Tax Incentives Announced In The Budget
What Is IFSC at Gift City?
International Financial Service Centre (IFSC) is a multi-service SEZ in Gift city. IFSC is India’s first Offshore financial center. Currently, there are more than 125 licensed financial entities in IFSC. The key institutions permitted to set up an IFSC unit are the Banking sector, Insurance sector, and Capital Markets.
International (IFCs) or offshore Financial Centers are financial centres that serve consumers from countries other than their own (OFCs). All of these centres are ‘international’ in the sense that they deal with the cross-border flow of money and financial products and services.
An IFSC is thus a jurisdiction that delivers world-class financial services to non-residents and residents in a currency other than the domestic currency (Indian rupee) of the area where the IFSC is located, to the extent permissible under present legislation.
The IFSC allows Indian corporate businesses and overseas branches/subsidiaries of Financial Institutions (such as banks, insurance firms, and other financial institutions) to bring financial services and transactions that are now carried out in offshore financial centres back to India.
It provides a commercial and regulatory environment that is comparable to London and Singapore, two of the world’s top international financial centres.
IFSCs are designed to give Indian corporations easier access to global financial markets while also complementing and promoting the development of India’s financial markets.
The Gujarat International Finance Tec-City in Gandhinagar, Ahmedabad, Gujarat, has become India’s first IFSC. It is the only IFSC in India that has been authorised.
Related read: Everything You Need to Know About Portfolio Management Services in GIFT City (IFSC)
What If 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:
1. Income Tax Benefits
Units in IFSC:
- 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.
- 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
2. Goods and Services Tax (GST) Benefits
Units in IFSC:
- No GST on services: (i) received by unit in IFSC. (ii) provided to IFSC / SEZ units, Offshore clients.
- GST applicable on services provided to Domestic Tariff Area
- No GST on transactions carried out in IFSC exchanges
3. Other Taxes and Duties
Units in IFSC:
- State Subsidies – Lease rental, PF contribution, electricity charges.
- Exemption from Security Transaction Tax (STT), Commodity Transaction Tax (CTT), stamp duty in respect of transactions carries out on IFSC exchanges.
1. Exemption from currency control regulations to IFSC Units:
Under SEZ Act, a unit set up in IFSC is treated as a non-resident. Even under Foreign Exchange Management Act, 2002 (“FEMA“) units in IFSC enjoy the benefits of a non-resident under exchange control provisions.
2. Liberalized currency control regime for Indian residents:
Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 (“ODI Regulations”) restrict investment by an Indian resident into an overseas firm in the financial services sector. To enable, Indian residents to set-up and invest funds in GIFT City, RBI, vide its Circular dated May 12, 2021 has permitted sponsor contribution from a sponsor Indian party in an Alternative Investment Fund (AIF) established overseas, including IFSC
What are the services rendered in GIFT city?
Gift City was established to facilitate business in the banking and insurance sector as well as capital markets. The following services are rendered:
- To raise funds for individuals, corporations, and governments.
- Asset management and global portfolio diversification are undertaken by pension funds, insurance companies, and mutual funds.
- Global tax management.
- Corporate treasury management operations.
- Risk management operations such as insurance and reinsurance.
- Merger and acquisition activities among multinational corporations.
Related read: How To Incorporate AIF In GIFT City- IFSC?
IFSC reinforces India’s strategic position as a global business hub for financial services. The city has a lot of economic and fiscal advantages. It has been meticulously planned and structured to lure foreign investors and institutions. The Government of India has made significant efforts to promote the establishment of the IFSC, Gift City. The aim is to be on par with other leading financial centers such as Dubai, Singapore, and London.
Why Choose Incorp?
At Incorp, we have the expertise and skills to guide you through the entire nuance of processes and Gift city. We are here to ensure peace of mind, from setting up your company in Gift City to staying compliant and managing your taxes on time with ease.