Gift IFSC (International Financial Services Centres), a special economic zone in Gujarat being developed as a financial services hub, received special attention in the latest union budget with Finance Minister Nirmala Sitharaman announcing a slew of incentives to draw entrepreneurs in the region.
The FM on Wednesday said companies in Gift IFSC will be regulated by the International Financial Services Centres Authority (IFSCA) to avoid dual regulation, making it a singular point for all approvals and reducing the compliances.
Further, a single information technology window will be set up for registration and approval from IFSCA, Special Economic Zone authorities, Goods and Services Tax Network, Reserve Bank of India, Securities and Exchange Board of India and Insurance Regulatory and Development Authority of India.
Sitharaman said that banking units set up in IFSC, including those of foreign banks, will be permitted to provide financing for acquisitions.
“The budget has further strengthened the position of Gift as an IFSC,” said Siddharth Shah, Partner, Khaitan & Co.
“The key changes enabling acquisition financing and single window clearance through IFSCA has made GIFT a compelling option for Indian GPs (General Partners) as well as a serious option for global asset managers and investors.
“The unified approach will make GIFT IFSC comparable to global regulators and more compelling a case for global investors to consider while evaluating their global set ups,” he added.
With the establishment of Gift city, India joined the likes of Singapore, where the monetary authority of Singapore regulates and supervises financial institutions.
In the last two years, Prime Minister Narendra Modi’s government has been rolling out several incentives for startups and fund to set up operations in the regions. It intends to encourage foreign capital to participate in India’s growth journey by offering tax exemptions and easing procedures for business.
In the budget, the FM said the government will further amend the IFSCA Act to provide arbitration and ancillary services, which in turn will build confidence in the investor community.
The incentives further extended the timeline of tax benefits to funds relocating to IFSC, Gift City for two more years till March 31, 2025. Companies in the SEZs are given fifteen years tax benefit.
Sitharaman further said that the government will recognise derivatives contracts issued by Foreign Portfolio Investors in the IFSC as legal and valid. Amongst other announcements, Sitharaman also said the government will facilitate setting up data embassies, which allow countries to ensure digital continuity by backing up critical databases abroad.
For the startup ecosystem, the FM has proposed extending the period of the tax holiday policy till 2024. Currently, startups can carry-forward losses on change of shareholding of startups to 10 years of incorporation from seven.
Budget 2023, which is Modi government’s last full budget before elections, was focused on economic growth and job creation and cutting down fiscal deficit.
