Back in 2007, when Prime Minister Narendra Modi was the Chief Minister of Gujarat, he conceptualised the idea of GIFT City. The vision was simple — to create a financial services centre that could compete with the likes of London, Tokyo, Shanghai, Dubai etc.

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The GIFT City, spread over 886 acres in Gandhinagar, consists of a multi-service SEZ that houses India’s first International Financial Services Center (IFSC). It also has an exclusive Domestic Tariff Area. The PM also recently inaugurated the India International Bullion Exchange (IIBX), and NSE IFSCSGX Connect.

IFSC caters to customers outside the jurisdiction of the domestic economy. A centre like this deals with flows of finance, financial products and services across borders. The IFSC operates by specially designed rules, so it also needs a separate regulator. So, the government, in 2019, established the International Financial Services Center Authority, IFSCA. It is a unified regulator for IFSCs in India, present and future.

IFSCA lays down the rules, and it also assumes the powers of four domestic sectoral regulators concerning IFSCs, which include the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDAI), and Pension Fund Regulatory and Development Authority (PFRDA).

Also Read: PNB opens international banking unit at GIFT City in Gujarat

In an exclusive interaction with CNBC-TV18, Injeti Srinivas, chairperson of IFSCA, said the IFSC should be seen as a gateway to connect India with global opportunities.

From 2015 to October 2020, IFSC was managed by domestic regulators. So, an enabling framework was put in by domestic regulators. “It was in October 2020 that the IFSCA was established as a unified regulator. In the past two years, there has been significant growth in the IFSC,” he said.

India, as one country, has two financial systems. One is the domestic financial system, and another is the international one. And the international financial system is operative in the IFSC. “We have one IFSC. So, it's a unique platform, where you are effectively treated as an offshore jurisdiction,” he said.

ECB, trade finance, leasing and acquisition finance are the products offered via IFSC for trade. “It will be like ECB, it can provide a trade finance, we also allow things like a craft leasing, we allow activities like acquisition finance, which are not available to the banks in the domestic area,” he said.

Also Read: Japan's MUFG Bank gets nod to set up branch at GIFT City

“As far as the Income Tax Act is concerned, the entities here are domestic entities. So, whatever tax regime is applicable in the domestic area is applicable here unless a carve-out has been given," he said.

He explained that to be competitive with other offshore jurisdictions, GIFT units enjoy a tax holiday of 10 years over 15 years.

"So, that is one great advantage they have. Secondly, there are some special carve-outs. For example, if you want to invest as a non-resident in the Indian market, if you come through the domestic gateway, you will have to have your PAN, and you will have to file annual returns. But if you invest it through the GIFT jurisdiction, you don't have to have a PAN or file annual returns,” he said.

He added that if a resident wants to invest in foreign securities, s/he can also use the GIFT platform.

The GIFT City authorities sold 10 million square feet of development rights in the first ten years. And in the last year, they have sold 11 million square feet of development rights.

“It shows that there is traction, and the real estate market is very upbeat. And I'm sure it will not be very long before international players in the retail business will also be looking at GIFT intently,” Srinivas said.

For the full interview, watch the accompanying video.

First Published:Aug 31, 2022 12:47 PM IST