The concept of "Ghar Wapsi" (Home Coming) is gaining momentum in the startup community, as new age digital companies face several challenges. "Ghar Wapsi" involves the re-domiciliation of Indian-founded startups that are currently operating in the Indian market but incorporated overseas, often achieved through a process called reverse flipping.

Nevertheless, this structure is far from straightforward, and it may not be the most tax-efficient option. Many startups are looking for government support and tax concessions to make this transition smoother. Notably, PhonePe re-domiciled to India in late 2022 and paid over $1 billion in taxes.

To address these issues, GIFT City has emerged as a potential solution, and the International Financial Services Centres Authority (IFSCA) committee has presented recommendations to the government regarding a simplified process for reverse flipping to GIFT City.

Prominent industry experts, including Siddharth Pai of 3One4 Capital, Mitul Mehta of Blume Ventures, and Ajay Rotti from Tax Compaas, delve into the challenges and potential solutions for expediting the reverse flipping process on the show "Big Deal" with Nisha Poddar.

While Mehta views the IFSCA's involvement as a positive development, he cautions that the full impact of their decisions may take some time to materialise.

"IFSCA flipping as an option is definitely a good step. The IFSCA report is very put out and thought through. As venture capitalists (VCs), I would categorise investors in two buckets — one is, SEBI registered funds other is non-resident investors. Typically for SEBI registered funds we have to go through a certain process for investing outside India. In case of companies that are domiciled in Gift, the report has recommended an exemption but for us as VCs we have a certain cap on the fund size beyond which we cannot invest in companies domiciled outside India. So till we don't have that neutrality or the exception we are probably indifferent but for the global ecosystem it opens up an eventuality for investment in GIFT IFSCA for sure. I see it taking some time.. I don't think there will be immediate movement because the ecosystem is yet to develop. So maybe it will start with fintech companies, edtech companies, these are the sectors that IFSCA is focusing on," Mehta said.

"However, with that what is also important is the ecosystem. A lot of these companies are primarily coming back to list on Indian exchanges. At GIFT IFSCA the exchange is still at a nascent stage and as it grows that becomes a viable option as well. So right steps in the good direction but I think it will take some time to eventualise entirely," Mehta added.

Watch the accompanying video for the entire conversation.

(Edited by : Sangam Singh)

First Published:Oct 26, 2023 10:18 PM IST