Incentives To GIFT City in Union Budget 2019 Could Encourage Financial Activities

Overview:

Gift City, located in the north on the banks of river Sabarmati and is a financial Central Business District between Ahmedabad and Gandhinagar in Gujarat. Gift City (Gujarat International Finance Tec-City) is a business district developed by the Govt. of Gujarat through a joint venture company. It is India’s first operational smart city and International Finance Service Centre is our PM Narendra Modi’s dream to create a financial hub like Singapore or Hong Kong in his home state. The idea for GIFT City was developed during the Vibrant Gujarat Global Investor Summit 2007. East China Architectural Design & Research Institute and Fairwood Consultants India were chosen for the planning of the city. 3 phases of 4 years each is planned for the development of the project. On the other hand, GIFTCL planned to develop an area of 85 million sq ft. to make sure that the city has its world-class facilities for connectivity, technology, communication, societal services, etc. for an upgraded living and work experience. The city is strategically located and well connected to the cities of Ahmedabad and Gujarat which is located at a distance of 26.6 km and 11.2 km respectively via Gandhinagar-Ahmedabad Road and Gujarat SH 71. Features of this project include an underground utility tunnel, a district cooling system, and automated vacuum waste collection. Many of these features are being introduced in India for the first time. Shah Pur, Lavarpur, Ratanpur, Pirojpur, Raysan Valad, Mahavirpuram are its neighbouring localities.

India’s only International Financial Service Centre (IFSC), at GIFT City, Gandhinagar, is one of the most challenging efforts of the Government for making foreign financial transactions to the Indian region. At present, financial sector performers such as banks, insurance companies, insurance brokers, stock exchanges, depositories, mutual funds, alternative investment funds (AIFs), and other SEBI-registered agents are allowed to establish shop at IFSC. Over the past few years, the Government has shifted its minds consistently towards it to make a commercial function for global financial professionals to relocate their operations to IFSC. It will be important to justify the taxation structure in IFSC so that it balances the tax structure in other global financial markets.

In February, the NDA government had presented in Rajya Sabha the International Financial Services Centres Authority Bill, 2019. The Bill plans for the establishment of an authority to support and control the financial services market in the International Financial Services Centres business in Special Economic Zones in India.

GIFT CITY IFSC Project Status:

GIFT One Tower in DTA, GIFT Two Tower in DTA, Jamnabai Narsee International School in DTA, TCS Tier 4 Data Centre in DTA, Hiranandani Signature Tower IN IFSC, Aspire One & Two – Incubation Centre in IFSC, Domestic Tariff Area, International Finance Service Centre (Finance & IT/SEZ) are completed and operational.

World Trade Center GIFT City – 4 towers under construction, Janaadhar Mangala, Brigade Tower in IFSC, Brigade IBIS Styles Hotel in DTA, Gift International Center, Savvy ATS tower in IFSC are all under-construction and full pace.

Gift City Features:

All the electricity cables will be underground and its power grid will be designed by ABB Groups of Switzerland.

Gas supply to the city will be provided by the existing gas Network of GSPL for gas transmission pipelines.

The cooling system will be provided by District Cooling System in GIFT City which will reduce the operational cost by 30-40% and avoids the capital cost of implementing coolers in each building.

All waste of the city will be treated through plasma gasification which will be automatically sucked through underground pipes.

Proposed and Planned Infra under GIFT City:

There is a plan to run a multimodal mix of the transport systems such as MRTS/LRTS/BRTS, etc for both intercity transport (to Ahmedabad, Airport, and Gandhinagar) and Intra-city transport.

They are also a plan to use Walk-to-walk concept between private and public transport.

GIFT City will have its own metro stations.

There is also a design for the use of electric personal rapid transport system in the city.

Look at how tax SOPs in the budget 2019 will offer impetus to Indian IFSC at GIFT City:

Union Budget 2019 introduced by Hon’ble Finance Minister Nirmala Sithraman unfolded floodgates of incentives for India’s first IFSC known as Hiranandani Signature located at GIFT city, Gandhinagar, Gujarat. With a view to improving infrastructure and development of a world-class financial hub, some tax benefits have already been given to various businesses operated out of IFSC like Banking and Financial Services, Insurance and Reassurance etc. The Union budget 2019 revealed plenty of extra tax SOPs with an aim to produce a positive environment for Indian as well as global financial service professionals to work from Indian IFSC. The idea is to give much-required incentive to the Indian International Financial Service Centre as a flourishing financial hub competing with the global members like London, Dubai, Singapore etc.

 IFSC international business is around $56 billion holding around $22 billion by the banking and $30 billion by insurance units. Over the next few years, GIFT IFSC alone could add $1 trillion to Indian industry and infrastructure and support to reach the $5-trillion GDP target over the next few years. To reach this challenging target, the Finance Minister awarded lucrative tax relief and a holiday which will bring more competing businesses to be operational at GIFT IFSC.

In her budget speech, Nirmala Sitharaman said that the government will trigger the execution of appropriate law to form an International Financial Services Centre (IFSC) authority that will define an up-to-date regulatory architecture for such world-class financial hubs and government is bound to put all required regulations and infrastructure in place to develop IFSC.

The government has proposed to provide several direct tax incentives to an IFSC. This would include extending income tax waiver of up to 10 years from 5 years, 100% profit-linked deduction under section-80LA in any 10-year block within a 15-year period, exemption from dividend distribution tax from current and accumulated income to companies and mutual funds, exemptions on capital gains to Category-III AIF and interest payment on the loan is taken from non-residents.

Apart from tax aspects, the major challenge includes fixing the uncertainties in the regulatory structure for IFSC and increasing the expertise of doing business. It is expected that these financial year incentives, guided by the establishment of a consolidated financial controller, will definitely contribute the much-needed push for IFSC to become a success in India.

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