As India’s economy started to grow rapidly in the early 2000s, visionary policymakers recognized a gap in the financial infrastructure. They envisioned a global financial hub, a city that would rival Hong Kong, New York, London, and other major financial centers.
With the hope of completely changing India’s financial landscape, this vision served as the momentum for the creation of the Gujarat International Finance Tec-City, or GIFT City
Let’s explore the journey of setting up a fund in GIFT City, the opportunities it presents, and why it stands out as a premier destination for global investments.
The Genesis of GIFT City
The Government of Gujarat launched the ambitious project GIFT City with the goal of developing a premier hub for financial and IT services. The state government and private businesses have worked together to create the city from its conception in 2007.
Spread across 886 acres, GIFT City consists of a Multi-Service Special Economic Zone (SEZ), which has been notified as India’s first International Financial Services Centre (IFSC), and an exclusive Domestic Tariff Area (DTA).
The Government of India (‘GoI’) launched India’s first IFSC in Gujarat at GIFT City in April 2015.
Setting Up a Fund in GIFT City: The Journey
The International Financial Services Centers Authority (IFSCA) established under IFSCA Act 2019, a unified authority now regulates the financial products and services within India’s GIFT IFSC, consolidating regulatory responsibilities that were managed by the –
- Reserve Bank of India (RBI),
- Security Exchange board of India (SEBI),
- Pension Fund Regulatory and Development Authority (PFRDA), and
- Insurance Regulatory and Development Authority of India (IRDAI)
To establish a fund in GIFT City, applicants need to secure approval from the SEZ authority and simultaneously apply to IFSCA following specified procedures.
Setting up an Alternative Investment Fund (AIF) involves steps such as
- Securing office space
- Setting up of Fund Management Entity (FME)
- Setting up of Trust (Fund) by appointing a trustee
- Obtaining approvals from SEZ authorities and IFSCA for FME & Fund and then
- Commencement of Business by Fund
and this process generally takes 9–12 months to have complete approvals due to extensive documentation and regulatory processes.
Though Single Window Clearance System which was announced in The Union Budget (2023–24) (for obtaining all regulatory approvals, enhancing ease of doing business and attracting global institutions) for IFSC Gift City is currently in the development stage and once its up and running will make things much easier for businesses/AIF reducing administrative and compliance burden.
Why GIFT City?
- Regulatory Benefits: GIFT City offers relaxed rules, tax advantages (100% Corporate Tax Exemption-10 out of 15 years/ zero stamp duty/No GST), and a streamlined approval process under IFSCA.
- Strategic Location: Located in Gujarat, it has great connections to major Indian cities and international destinations, close to Ahmedabad International Airport.
- World-Class Infrastructure: GIFT City is known for its state-of-the-art office spaces to meet international standards, ensuring a comfortable and efficient working environment.
- Ease of Doing Business: Simplified procedures, a single-window clearance system, and effective dispute resolution make it easy for investors to operate in GIFT City.
- Non-Resident Investors: Non-Resident investors are exempt from obtaining India PAN and filing return of income in India, subject to certain conditions.
- Fund Operations: Having an FME (Fund Management Entity) license in GIFT City streamlines launching multiple fund schemes and operating under all AIF categories, especially Category II and III, by offering a one-stop shop for approval and compliance, unlike the traditional India Funds.
Way Forward:
IFSC, GIFT City is positioned to grow into a major financial services hub due to its top-notch infrastructure, favorable regulatory environment, and advantageous geographic location. Setting up a fund in GIFT City offers investors unparalleled opportunities for High Return, diversification, and growth.
The city’s continued growth promises to completely change how foreign investments in India will go in the future.
In this journey, as on March 2024, as per the IFSCA latest data, 114 FMEs and 120 Funds are registered in IFSC GIFT city and commitments raised totaling 8410.49 Mn USD (approx.- INR 69302 Crore)
So, Investing in GIFT City (with a minimum capital commitment of USD 150,000) is not merely about leveraging current opportunities; it is about contributing to a broader vision that aims to position India as a dominant player in the global financial landscape.
Author:
Rakesh Rana
