March 1, 2016


The Union Budget on Mondayannounced Income Tax incentives for companies which will set up their operations in the GIFT City SEZ. The companies in GIFT SEZ are now expecting relief from some of the provisions of the Companies Act. They also expect establishment of a mechanism for appeals and arbitration.

As per the Income Tax laws, units in the SEZ will enjoy 100% income tax exemption for the first 5 years and 50% in the next 5 years.

The GIFT City management is currently exploring options for establishing an arbitration centre and is in talks with the arbitration centres in Hong Kong, London, and Singapore. It is expected that one of these arbitration centre will set up shop in GIFT City.

The companies which are planning to start their operations in the GIFT City IFSC SEZ have represented to the Government of India on non-applicability of certain provisions of the Companies Act.


The companies feel that some of these provisionsrelated to filing information and Board of Director compositions should not be applicable to these units as they are to be deemed as foreign companies.

Ajay Pandey, managing director and group chief executive officer, GIFT City said that the GIFT City management is working with the government on both the issues and hope to see progress.

The IFSC units in GIFT SEZ will be regulated by the regulatory authorities like RBI, SEBI and IRDA but the rulings by these regulators will require a legal dispute redressal mechanism. The job of dispute redressal can be given to an international arbitration centre at GIFT City.

Mr. Pandey speaking on the developments welcomed the regulations for the development of the IFSC in India. He feels that the Budget 2016 announcements coupled with the information-technology policy and also waiver of stamp duty on share broking transactions in GIFT City will help the development of India’s first IFSC.

The Gujarat government during its 2016 budget proposals has stated that transactions of brokers which will have their registered offices in GIFT City would be exempt from stamp duty.

Currently, only 2 banks are in operations - YES Bank and Federal Bank. In the first 40 days of their operations in GIFT City, these 2 banks have undertaken transactions of more than $100 million.
New India Assurance &General Insurance Corporation hasalready applied to IRDA for obtaining licence to operate in the GIFT SEZ.Bombay Stock Exchange is waiting for changes to be made to the Companies Act and establishment of a dispute redressal mechanism before it launches its operations in the GIFT IFSC. Already, all the major Stock Exchanges and Commodities Exchanges have signed memorandums with GIFT City to operate in GIFT IFSC.

Nishith Desai of Nishith Desai and Associates feels that more concrete steps are required to make the GIFT IFSC globally competitive. He added that currently Singapore has a tax rate of 10% for fund management and investment advisory activities. Singapore also provides tax incentives for banks and insurance companies. He opined thatthe Budget relaxations by the Indian Govt. area good start but it requires a bigger push and initiatives to ensure that India’s IFSC work on par with the other IFSCs of the world.





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