Under its Smart Cities Mission, Indian Government wants to create cities that are technologically equipped and have energy-efficient buildings. An energy efficient building offers suitable environment for offices and housing with minimal energy consumption and wastage of energy, thus minimizing energy. It offers best-in-class facilities, and efficient transportation system. The first such model city, is getting ready in Gujrat. Its work is in progress, it is called Gujarat International Finance Tec-City Co. Ltd or the GIFT City. This smart city is being developed as a central business district in Gujarat’s capital Gandhinagar. The Rs 78,000-crore project would provide residential, corporate, retail, and other facilities.  At the core this project is technology driven to ensure transport connectivity, resource management, water distribution, and even waste disposal management. It will also house India’s first International Financial Services Centre (IFSC).

GIFT City aims to be a ‘smart city’ for India’s growing finance and technology sectors. It hopes that a promise of ‘intelligent design’ and the most modern infrastructure including gas, electricity, and transport will attract businesses from other parts of India as well as overseas.

The idea of GIFT City was planned back in 2008 and became operational in 2015. The simplified regulations bundled with various tax and other advantages offer an inviting ecosystem making it a promising destination for both local and global investors. With a specific attention on financial services, it also becomes a promising landscape for both domestic and international financial giants. It provides distinguished benefits to the financial, IT/ ITeS (Information technology enabled services) companies making it a pivotal foundation at par with the various global financial and IT hubs. GIFT City is a vision of the Government of India and Gujarat aiming to serve as a centre for global banking, trade, and business.

An IFSC is a specific location within the mainland of the country treated as a foreign location with an intent to enable global business offering a worldwide regulatory regime. IFSC at GIFT City gives an opportunity to global and domestic businesses to set up a company, limited liability partnership and subsidiaries in the GIFT City under various business verticals. These include banking, insurance, stock exchange, alternate investment funds, aircraft leasing and other businesses as well such as ship craft leasing, etc. The Gift City will be giving Unified Regulator & Single Window Clearance.

IFSC in India are governed by a unified regulator named IFSC Authority (IFSCA) which encompasses regulatory powers of four financial services regulators in India namely Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), Insurance Regulatory Development Authority of India (IRDAI), Pension Fund Regulatory & Development Authority of India (PFRDAI) enabling it to provide single window clearance for all necessary approvals under one umbrella in an easy manner.

GIFT City is declared as Special Economic Zone (SEZ). The SEZ is created to encourage exports and foreign investment especially for multinational corporations. SEZ offers benefits to the businesses operating in this zone, including duty-free imports and exports, easy regulatory processes, tax benefits. GIFT City is the first IFSC in India and to make it more attractive and enticing the Government of India also declared it as a SEZ.

GIFT IFSC has been designated as a foreign jurisdiction of a non-resident zone under the Foreign Exchange Management Act (FEMA) Regulations enabling friendliness for carrying out foreign exchange transactions in liberal manner. The entities setup in the GIFT IFSC can transact in, retain, repatriate the foreign currencies without limitations which are otherwise applicable to the mainland India.

Easy movement of foreign capital

The offshore status of the GIFT IFSC bundled with various relaxations and less restrictive financial regulations makes it an attractive destination for foreign investors allowing unrestricted movement of fund invested in the form of repatriation of profits, dividends, and investments back to the home country of the foreign investors.

Liberal policies and business friendly regulatory framework

The regulatory regime of GIFT IFSC is formulated to parallel the best practices accepted globally facilitating flexibility and reduced compliance burden. Amongst the plethora of such benefits a few noteworthy relaxations include exemption to non-residents from obtaining permanent account number (PAN) or filing return of income in India in certain circumstances.

Tax benefits to the IFSC Units setup in GIFT City

The IFSC units’ setup in the GIFT City, India offers various tax benefits like exemptions on corporate tax, tax holiday for ten years, reduced Minimum Alternative Tax (MAT) for increasing the profitability and hence growth of the business houses. It also offers numerous indirect tax benefits such as no Goods and Service Tax (GST) on services received by unit in IFSC, no GST on services provided to IFSC units / SEZ units / offshore clients. If the services are provided to the Domestic Tariff Area of mainland India, then the GST is applicable under Reverse Charge Mechanism.

Tax benefits to the Investor investing in IFSC GIFT City

The investor investing in the GIFT IFSC gets numerous fiscal benefits including the benefits such as interest income paid to non-residents on money lent to IFSC units in GIFT city are exempted from tax, transfer of specified securities listed on IFSC exchanges by non-residents are not treated as a transfer and  hence gains arising from such transfers are not treated as capital gains and are taxable in India , exemption from Securities Transaction Tax (STT) , exemption from  Commodity Transaction Tax (CTT), dividend received by investor in IFSC unit is subjected to concessional rate of tax, no GST on transactions carried out in IFSC exchanges.

Various financial benefits and incentives

The Government of Gujarat provides various state incentives in the form of financial incentives support schemes to attract companies and investors to GIFT IFSC. These incentives include grants, subsidies, and reduced operational costs due to OPEX (Operating expenses) support, CAPEX (Capital expenditure) support, employment generation incentives. The government has also announced various state level incentives and subsidies to Information Technology (IT) and Information Technology Enabled Services (ITeS) Companies.

Benefits of GIFT City for startups

To promote the innovation and ideas and entrepreneurship IFSC-GIFT City provides dedicated FinTech support and requisite startup friendly environment with an aim to shape and fulfil the aspirations and ambitions of start-ups and entrepreneurs.

Conclusion

The Government of India recognizes and reinforces that tapping the global capital and global market are the key drivers for the development of businesses across the borders and plays a pivotal role in the overall economic growth and to strengthen the position of the country in the global economy.

Globally, we see such cities at Aladdin City, Dubai, South Korea, Abu Dhabi, and Saudi Arabia.

Dubai has setup on a stellar commercial project at Aladddin City that will recreate the magic of the renowned Disney’s Aladdin series. Spread across 4,000 acres, the project will boast of suspended golden walkways and three main towers that will be designed like genie lamps. The city, to be built on the Dubai creek, will house hotel and commercial spaces with ample parking space. It is also in the race of being named as world heritage site by the United Nations Educational, Scientific and Cultural Organization.

Songdo International Business District at South Korea is being built on a reclaimed land near South Korea’s Seoul, the estimated cost of this project is $40 billion. This is a 10-year development project, which will be a business district with 80,000 apartments, 50 million sq ft of office space and 10 million sq ft of retail space, along with hospitals, hotels, schools, and cultural amenities. It will house Northeast Trade Tower, the tallest tower in the country, and Incheon Tower, an under-construction 151-floor twin tower. The city is smart in many ways, as it will provide charging stations for electric vehicles and automatic waste collection system. All the buildings in this city will be built on a par with LEED (Leadership in Energy and Environmental Design) requirements.

Yas Island at Abu Dhabi is being built on a man-made island, the city of Yas is being transformed into a business, entertainment, shopping, and leisure destination by Aldar Properties. The project is expected to cost over $40 billion and will occupy over 2,500 hectares, 1,700 hectares of which will be reclaimed land. The world-class entertainment activities will include a Formula One racing track by Etihad, Ferrari World, Marina Circuit, Yas Water world and Abu Dhabi Grand Prix, along with many restaurants. The Water world and Marina Circuit will provide a wide range of motor sports. 

Oil-rich Saudi Arabia has been slowly expanding into the petrochemical and refinery business district. After building the first Jubail Industrial City project, the Kingdom is expanding the city further by spending $80 billion. The industrial city is known to be one of the largest civil engineering projects and will house many industrial plants and an oil refinery that can produce 350,000 barrels of oil in a day. It will also have a desalination plant of 800,000 cubic meters in volume. The city will also be well-connected with roads, rail tracks and even highways. The project is expected to be completed by 2024. 

The Hudson Yards project, located in the West of Manhattan, is being developed over an operational train yard. The project, which is a joint venture between New York City Department of City Planning and Metropolitan Transportation Authority, will be a 17-million square feet mixed use project boasting of commercial, residential, retail and leisure development. The project will also have its own subway stop. The first commercial tower, which has already locked in global brands, including Coach and L’Oreal as tenants, is 52-storeys high. The entire project is expected to cost over $20 billion.