GIFT City IFSC – An Attractive Financial Platform in Gujarat

The IFSC at GIFT City provides global investors/ financial entities easy access to the Indian economy and furthermore access to India’s large hinterland economy. It also allows Indian entities to access international markets/ global market through the IFSC.

To regulate the IFSCs, the Government of India established the International Financial Services Centers Authority (IFSCA) in April 2020 under the International Financial Services Centers Authority Act, 2019.

For ensuring a comprehensive, consistent, streamlined and unified regulatory framework governing units in IFSCs, the regulatory powers of India’s financial services regulators i.e., the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory Development Authority of India (IRDAI), Pension Fund Regulatory Development Authority of India (PFRDAI) have been vested in the IFSCA with respect to regulation of financial institutions, financial services and financial products in the IFSC.

The IFSCs provide investors with the opportunity to set-up units in the IFSC to carry out business in the areas of banking, investment, insurance and re-insurance, capital market, asset management and allied/ support services. Indian banks as well as foreign banks may obtain a license/permission from the IFSCA to set up an IFSC Banking Unit (IBU) or IFSC Banking Company (IBC) for undertaking various banking activities such as borrowing and lending, acceptance of deposits, granting External Commercial Borrowings/ trade finance, short term loans, issuing bank guarantees etc. under the regulatory framework and governance of the IFSCA and additionally under the directions and instructions issued by the home regulator of the parent bank. Also, Indian and foreign insurers, re-insurers and intermediaries may set up IFSC Insurance Office (IIO) in the IFSC. Further eligible participants permitted in capital markets in IFSC include stock & commodity exchanges, clearing corporation, depository, broker, investment advisors, portfolio managers, AIFs, mutual funds.

Allied/ support services permitted to be carried out in the IFSC include aircraft leasing and financing, accounting and audit services, legal and consultancy services, R&D services etc.

The registered entities, including branches (wherever permitted) that are established in the IFSC are facilitated by an internationally comparable regulatory framework and are permitted to operate under a special offshore status within India. Furthermore, units in IFSC also enjoy special considerations under several domestic laws in India. Notably the Ministry of Corporate Affairs (MCA) has notified exemptions and modifications in respect of certain provisions of the Companies Act, 2013 in their application to a specified IFSC Private Company and Specified IFSC Public Company which are licensed to operate from an IFSC.

It is also important to note that the tax regime has also been made highly competitive with a 10 (ten) year tax holiday, no GST, no capital gains tax etc. with respect to Units and their business operations in the IFSC.

The IFSCA has taken up further initiatives to promote IFSCs as a leading fund-raising destination for both Indian and foreign issuers and as a major international center for AIFs specially focusing on green finance and social impact capital. The Central Government has also stated that it would be keen to host all sovereign funds, pension funds and endowment funds apart from other funds in the IFSC in India. IFSCs are also positioned as a global hub for fintech start-ups with the IFSCA notifying regulatory sandbox framework and special incentives/schemes for fintech start-ups.

With state-of-the art infrastructure, unified regulatory regime, establishment of a centralized authority for governance, it is the Government’s endeavor that the IFSC at GIFT City re-enforce India’s strategic position as a global hub for financial services and position India as a strong contender to become a Global Financial Centre in the times to come.

(This Article is solely for information purposes, does not constitute legal or professional advisory and should not be relied upon or used as a substitute for legal advice from attorney.)

About the Authors: Jayshree Navin Chandra, Senior Partner at ZEUS Law, has been a practicing lawyer since 2001 with extensive corporate and transactional advisory experience. She advises and represents clients ranging from Fortune 500 companies to start-ups as well as Central and State Government departments and public bodies in a wide range of domestic and cross border transactions, across industries in practice areas including Corporate and Company Law, M&A and Joint Venture, Private Equity, FDI & FII, Real Estate and Infrastructure, Data privacy and protection, Intellectual Property & Commercial Law Advisory.

Ms. Nitika Bakshi is a Senior Associate at ZEUS Law and works in the Corporate and Commercial practice vertical.

ZEUS Law Associates is an ISO certified full service corporate commercial law firm with a team of dedicated and experienced lawyers well versed in handling domestic and cross border transactions across sectors, jurisdictions and regulatory landscapes. The firm’s practice areas include Corporate and Company Law, M&A and Joint Venture, Private Equity, FDI & FII, Real Estate and Infrastructure, Intellectual Property & Commercial Law, Litigation, Alternate Dispute Resolution, Indirect Tax and NRI Services.