IFSC-GIFT City, The International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT City) is strategically positioned to greatly improve Indian entrepreneurs’ access to global capital and promote innovation in financial products as the country’s economy continues its trajectory towards a GDP of $5 trillion and beyond. This article highlights IFSC-GIFT City’s significance in connecting local firms with global prospects by examining its evolution and major activities.
Genesis and Evolution of IFSC-GIFT City
IFSC-GIFT City was designed in 2008 and has been in operation since 2015. Its goal was to provide a competitive onshore offshoring option to global financial hubs. Since 2019, proactive regulatory and policy initiatives have drawn global corporations from a wide range of industries, encompassing fintech, biotech, family offices, and more, in addition to banking and financial services (BFSI).
Regulations are in line with international standards and firms can obtain approval through a single window through the Unified Regulator IFSCA, which unifies authority from the RBI, SEBI, and IRDA. Businesses in IFSC-GIFT City benefit from streamlined procedures and regulatory compliance thanks to this coordinated strategy.
By creating data embassies and an EXIM Bank subsidiary, the government hopes to facilitate business dealings and bolster GIFT City’s potential for expansion.
According to FEMA laws, entities in GIFT City are considered non-residents and are granted a ten-year tax vacation, which exempts them from paying GST, MAT, or filing returns. Businesses have been encouraged to establish operations in GIFT City by these incentives.
Growth Opportunities and Recommendations:
IFSCA has recently launched steps to address issues like “flipping” start-ups. The creation of special tribunals for arbitration, tax neutrality for relocation, streamlining tax rates, and modifications to company law and regulations are among the suggestions. Acceptance of these suggestions is essential for IFSC-GIFT City’s business to continue improving.
The government’s support for the expansion of IFSC-GIFT City is demonstrated by its approval of acquisition financing by IFSC Banking units, recognition of offshore derivative transactions, and initiatives to increase access to capital markets. Additionally, Indian businesses are being encouraged to list bonds in GIFT City by the exemption from withholding tax on interest generated on foreign currency loans.
Fund Management Regulations:
Funds in IFSC-GIFT City are now able to invest more than 25% of their corpus in a single portfolio firm according to the IFSCA’s publication of Fund Management regulations in April 2022, which streamlined compliance. With over $15 billion in committed capital from about 70 registered funds, IFSC funds are now on par with offshore funds.
The business environment at IFSC-GIFT City is favourable, meeting the goals of entrepreneurs and start-ups. Strong infrastructure development and international investment attraction are helping to support continuous economic growth that exceeds 7-8%. For India’s economic environment, this transition is not only a vision but a quickly changing reality.