NB Twitter Scan | GIFT CITY- India's International Financial Services Centre

GIFT CITY- India's International Financial Services Centre

450+ companies registered & several global funds now investing in this Special Economic Zone (≈$240 million). It enjoys special provisions- No GST on services by GIFT-registered units, and no income tax for 10 years.

 

 

 

Timeline: 

2012-Construction on GIFT City started but got stuck in regulatory blocks.

2015-It was set up as a special economic zone (SEZ) focused on financial services.

It's a joint venture bt. Gujarat Urban Development Company and Infrastructure Leasing & Financial Services. The city offers a range of financial services in:

Its regulatory framework is governed by the International Financial Services Centres Authority (IFSCA). GIFT City has been designed to attract domestic and foreign investments, and several global players have already set up shop here. It's a tax-efficient jurisdiction, with tax holidays for service providers and exemptions for investors. One of the major developments in GIFT City has been the transition of SGX derivatives from Singapore to GIFT City, which is expected to bring in significant revenue and boost the city's reputation as an international finance hub. Portfolio management services (PMSes) like PhillipCapital and Marcellus have set up shop in GIFT City, offering customized global fund management services for HNIs and ultra-high net worth individuals. The funds managed under GIFT City are not regulated by SEBI or the Reserve Bank of India but by IFSCA (Fund Management) Regulations, 2022. However, it's important to check the fund manager's expertise in international markets before investing in PMSes. GIFT City provides a range of tax benefits for portfolio managers and investors, including a tax holiday for managers and exemptions for non-resident investors. However, residents are taxed at the capital gains tax rate of 20% with indexation benefits. GIFT City has been successful in attracting investments and businesses from offshore, with a key objective of bringing back India-centric businesses.

 

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SBI Funds Management and Alchemy Capital Management are some of the firms that have relocated funds to GIFT City. Kotak Mahindra Bank has issued the first-ever FPI license to Alchemy India Long Term Fund for relocating from Mauritius to GIFT City. This is a significant milestone for the city and sets a precedent for other funds to evaluate the benefits of relocation. However, there are some challenges that GIFT City needs to address, including infrastructure development, talent acquisition, and market competition from other global financials. The city needs to offer a competitive value proposition to attract investors. It has a long way to go. The establishment and growth of GIFT City represent a major milestone for India's financial sector, providing a promising new avenue for both inbound and outbound investment. As the IFSC continues to develop, it may become a key player in the global financial industry. Notably, Kotak Mahindra Bank recently issued the first-ever foreign portfolio investor (FPI) license to Alchemy India Long Term Fund incorporated in GIFT City and registered with IFSCA. This sets a precedent for other funds to evaluate the benefits of relocation to GIFT City. Overall, the potential for GIFT City to become a game changer in the financial industry is clear. With tax benefits, streamlined regulations, and a growing pool of financial services providers, GIFT City offers a promising new frontier for both domestic and international investors.

 

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The following is an opinion and not a thread by @SejalSud.

Any country which has an SEZ reflects the country’s collective cognitive dissonance. It wants to stick to its socialist past due to various reasons such as social, political, and ideological. But it understands that to create wealth, Free Market Capitalism is the only way. This is why instead of opening up the entire country by accepting Free Market Capitalism, it creates tiny islands of capitalism, which can create wealth to provide socialist policies everywhere in the country. The most prominent example of this is China in the past.