What is GIFT City and Why It Matter for Businesses
Overview of Gujarat International Finance Tec-City (GIFT City)
Located on the banks of the Sabarmati River, between Ahmedabad and Gandhinagar, GIFT City is an offshore special economic zone in India. It is India's first operational smart city in India, with regulations that not only entice businesses and employees but also global investors. It has been conceptualised to compete with global financial hubs like Singapore, Dubai, Hong Kong, etc.
DTA and SEZ Area
GIFT City is divided into two areas, the Domestic Trade Area (DTA) and the Special Economic Zone (SEZ) area. These areas are governed by distinct regulatory frameworks. Operations of businesses in the DTA are subject to Indian regulations. It is meant for businesses catering to the domestic markets.
The SEZ area is treated as an offshore entity according to the FEMA rules. This means, for all practical purposes, it is treated like part of India that is outside India. An arrangement like this allows for liberalised rules and tax exemptions to be applied in the SEZ area.
In this article, we will dive deeper into the regulations surrounding GIFT City, the types of business sectors, and the processes involved in setting up a business entity in GIFT City.
Regulations in GIFT City SEZ
International Financial Services Centres Authority (IFSCA) regulates the SEZ area.
Unified Regulator - The Role of IFSCA
IFSCA regulates all financial and non-financial activities taking place in the SEZ area of GIFT City. IFSCA combines the regulatory powers of Indian regulators like RBI, SEBI, IRDA and PFRDA. Even the universities operating out of GIFT City are regulated by IFSCA.
The combined regulatory powers of IFSCA streamline the operations of the entities operating out of GIFT City SEZ.
Key Business Sectors Operating in GIFT City
GIFT City provides a thriving environment for businesses related to the financial sector like banking, insurance, capital markets, funds, aircraft and ship leasing services, fintech startups and ancillary services related to finance to operate. In this section, we will look into each of these sectors.
Banking and Financial Institutions
The International Banking Units (IBUs) form the pillar of the banking ecosystem in GIFT City. 30+ national banks and international banks have their units in GIFT City. This includes prominent Indian banks like SBI, HDFC, ICICI etc. Apart from this, prominent international banks like Standard Chartered, HSBC, etc. also have IBUs in GIFT City.
These banks provide commercial and retail banking services in GIFT City.
Insurance and Reinsurance
The insurance business in GIFT City has been growing steadily in GIFT City. Denomination in an international currency like USD and providing global coverage have been the key USPs of GIFT City insurance.
The insurance offices located in GIFT City are treated as International Insurance Offices (IIO). They are similar to insurance offices located in foreign countries and primarily cater to the offshore market.
Companies or individuals who hold a valid certificate of registration issued by IRDAI in India may seek authorisation to act as an IIO. The permitted categories of insurance intermediaries in GIFT City are insurance broker, corporate agent, surveyor and loss assessor, third party administrator providing health services etc.
Capital Markets and Broking Services
There are two international stock exchanges in GIFT City: India INX (subsidiary of BSE) and NSE IX (subsidiary of NSE). Primary instruments available for trading in these exchanges are GIFT City futures and options contracts. Other than that, there are the top 50 US stocks available to be traded as Unsponsored Depository Receipts (UDRs).
This provides an opportunity for stock brokers, sub-brokers, underwriters, merchant bankers, investment advisors, portfolio managers, clearing members, custodians, clearing houses, depository participants, and credit rating agencies to set up operations in GIFT City.
Investment Funds and Fund Management Entities (FMEs)
The investment funds and fund management entities refer to the Alternative Investment Funds (AIFs) set up in GIFT City. GIFT City's regulatory structure allows AIFs to have different trading strategies and invest in Indian (inbound) and foreign (outbound) equities to set up operations in GIFT City.
Fund managers can open venture Capital schemes, portfolio management services (PMS), family offices, hedge funds etc, in GIFT City. The categorisation and investment style of the fund schemes are classified according to rules defined by SEBI. The income tax laws have been amended from time to time to incentivise existing funds located in overseas jurisdictions to consider relocating to GIFT City.
Global In-House Centres (GICs) and Tech Firms
The regulations and tax benefits available in the form of no GST, and reduced burden on CSR compliance have been supportive of firms providing back office services to set up offices in GIFT City.
Firms providing IT and back office services have flexible and fewer regulatory hurdles to cross while setting up operations in GIFT City.
In addition to this, fintech startups and innovation hubs working in cross-border finance have been encouraged to set up in GIFT City. A favourable regulatory regime has supported these startups in their innovation of products and services.
Fintechs in the remittance and payments space, digital lending, personal finance, wealth tech, alternative trading platforms etc. have been set up in GIFT City.
Foreign Universities and Education Institutions
The foreign universities have been allowed to set up campuses in GIFT City. The universities get flexibility in framing their curriculum. Deakin University and the University of Wollongong from Australia, and the University of Surrey and Queen’s University Belfast from the UK have set up campuses in GIFT City.
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