Unboxing the GIFT: Exploring the dawning aspects of India’s most sought-after Investment Hotspot

Acceleration is observed in its true sense from policies to execution; the growth curve is in providing the global and domestic players with a gateway to greenfield investment (a type of FDI through which a parent company creates a subsidiary in a different company, building its operations from the ground up) in India. GIFT City is regulated and governed by the International Financial Services Centres Authority established under the special legislation, IFSCA Act, 2019 which focuses and strives to devise and regulate everything around financial products and services.

The Gujarat IT/ITeS Policy for the timeframe 2022-2027 has been introduced with a vision to provide and nurture an ecosystem that catapults the IT realm in Gujarat. The State of Gujarat also aims to charge ahead in the Artificial Intelligence race through the present policy by means of setting up Institutes and Centers of Excellence in this regard. The various nuances of the policy have been described as under:

The IFSCA (Fund Management) Regulations, 2022 (FMR), which put forward a robust framework, outlaw various notifications, orders and regulations enforced by the SEBI, including its AIF Regulations, and the IFSC Guidelines. Foreign investment income generated by non-resident investors via an Alternative Investment Fund formed in an International Financial Services Centre is exempt from taxation, providing financial services in foreign currencies recognition to be called out in an autonomous jurisdiction distinct from the entirety of India.

The Ministry of Finance of India, through the Central Board of Direct Taxes, has released an important notification on January 4, 2024 that pertains to individuals who are not residents and are involved in investment activities through a contract with a capital market intermediary. This notification provides authorization to non-residents to engage in investment activities via approved IFSC Units, giving them tax benefits under Section 80LA.

The FMR introduced the concept of “Family Investment Fund” to facilitate the wealth and estate management of family units across India by providing them an abode at the GIFT City. Such a Fund shall raise a corpus of USD 10 Million within a period of three years from the date of its registration. ‘Single Family’ units which are allowed to set up FIFs at the GIFT City are defined as such Indian entities that are under family control while holding onto 90 percent of the economic interest in such entities. The benefits of setting up an FIF are tabulated below:

Homage to Aircraft Leasing was laid back way back in May 2018 with the Constitution of a Working Group in this regard by the Ministry of Civil Aviation. In January 2019, the Ministry of Civil Aviation, GoI published the “Project Rupee Raftaar”, a report by the Working Group, the recommendations of which combined with the tax holiday proposed for IFSC Units in July 2019 provided GIFT City as the best suiting pedestal for stimulating Aircraft Leasing. The government of Gujarat, aligning with the scheme, also put in place the needed relaxations in Stamp Duty in August 2020, following which “Aircraft Lease (Operating, Financial and Hybrid)” was notified as a financial product in the IFSC in October 2020. The Indian leasing market is expected to grow by 4.8 times of its 2018 value until the end of 2026 (Airbus Global Market Forecast 2019-2038, IATA). Further, such airlines would enjoy exemption from Basic Custom Duty (BCD).

The ban on liquor has been uplifted and hotels, restaurants and clubs in the GIFT City will be permitted to provide wine and dine facilities to their customers who possess requisite liquor access permits. The upliftment of the ban is aimed at providing a global business ecosystem to the various stakeholders of the GIFT City regime. Further, the GIFT City aims to boast of an area dedicated to recreational facilities with high street retail, entertainment and other landscapes including water sports, etc. The recent developments even suggest setting up of an F1 Track at the GIFT City by 2028 while the survey and feasibility study is underway.

The government of India’s notification has expanded the scope of financial products and services to include “bullion spot delivery contracts” and “bullion depository receipts” under the IFSC Act, 2019. Thereupon, the IFSCA (Bullion Exchange) Regulations were enacted, which lay down the structure to establish Exchange, a Clearing Corporation and Depository Services in addition to vaults. IFSCA has also suggested setting up of a consortium of exchanges. To this end, the NSE, and BSE, through its subsidiary INX, NSDL and CDSL, have also entered into an MoU.

Finance is the core that provides for the sustenance as well as the development of all the sectors, and thereby it becomes the soul of economic development. In such circumstances, the advent of the GIFT City is not purposed to just provide a pedestal for the desirous, but to enable it to become a self-evolving platform that is self-sufficient to provide for the upliftment of anything that breathes through finance, aiming upwardly. The State has also launched a 100 percent State funded scheme for promoting the use of drones in the agriculture sector, in the quest of promoting the use of technology in day-to-day life. Further, the key objectives of Gujarat’s EV policy include making Gujarat a manufacturing hub for electric vehicles and ancillary equipment.

The same has further been given a smooth runway with the Ministry of Finance’s recent notification permitting the direct listing of Indian companies on the GIFT City’s India International Exchange and NSE International Exchange, enabling them direct and easy access to global capital. The January 18 Notification by the Union Ministry of Finance has further increased the scope of Financial Services by including “financial crime compliance”, focusing on Anti Money Laundering, Countering the Financing of Terrorism, and FATF Recommendations.

About the author: Moiz Rafique is a practicing Advocate before the High Court of Gujarat and Managing Partner at Privy Legal Service LLP.