Union Budget: FM Announces Several Sops To Back GIFT City

FM Nirmala Sitharaman, in the Union Budget 2023, proposed amending the powers of the International Financial Services Center Authority (IFSC) under the Special Economic Zone (SEZ) Act to avoid dual regulation. The move is hailed by industry stakeholders. The initiative can help the city gain traction with investors from all across the globe. Experts said that it is a major boost that could rival already established cities such as Dubai, Singapore, and Hong Kong.

Commenting on the move, Prashanth Prakash, Partner, Accel, stated, "The investing community welcomes the initiative of making GIFT IFSC a singular point for all approvals and mitigating SEZ compliances, allowing acquisition financing, and enabling arbitration, which will go a long way toward making GIFT a fund management hub in the world. Plus, the relocation of the fund timeline has been extended to 2025 in the IFSC, is a welcome move."

The GIFT City project in Gujarat's Gandhinagar was proposed in 2007 by PM Narendra Modi, the then CM of Gujarat. Since then, the project has been dubbed PM Modi's pet project. To give a major boost to the project, in the budget, the government set-up a single window IT system for registration and approval from IFSCA, SEZ authorities, RBI, GSTN, the Insurance Regulatory Development Authority (IRDA), and the Securities and Exchange Board of India (SEBI).

Karthik Reddy, Co-founder, Blume Ventures and chairperson of IVCA, said, "A big win for the investing community in this budget was the announcement related to GIFT IFSC—making IFSC the supreme authority for all SEZ compliances and boosting India’s position as a fund management hub in the world. Plus, the relocation of the fund timeline extension to 2025 in the IFSC is well appreciated. The announcement that the highest surcharge rate will be reduced from 37 per cent to 25 per cent of the maximum tax rate will also benefit greatly."

The measures proposed for GIFT IFSC have made it even more attractive for fund managers. "The single window clearance for all approvals, making IFSCA the authority for all SEZ compliances, allowing acquisition financing, and enabling arbitration will truly make GIFT an International Financial Services Center," explained, Siddharth Pai, Co-founder of 3One4 Capital and Co-Chair, Regulatory Affairs Committee, IVCA.

He further added that one missed opportunity was that the rationalisation of capital gains taxation, especially for startups, was not announced. This would have made this budget a game changer for Indian entrepreneurs and investors.

Furthermore, FM also announced the establishment of an EXIM Bank subsidiary that would eventually promote emerging sectors such as aircraft and ship financing activities in GIFT City. Moreover, the initiative to establish data embassies at GIFT City would help. So far, more than 390 organisations from the whole range of financial services, including banks, capital markets, insurance, fintech, aircraft leasing, and gold exchanges, are registered with the GIFT IFSC.