What is GIFT City?
GIFT City, or Gujarat International Finance Tec-City, is a Special Economic Zone (SEZ) in Gujarat, India. It includes an International Financial Services Centre (IFSC) and a local financial centre. The Government of Gujarat initiated this greenfield project to promote India’s first smart city with the aim to provide advanced physical infrastructure for finance and technology-related activities. GIFT City was originally conceived as a real-estate project but evolved into a multi-service SEZ focused on attracting foreign investors and institutions to become a leading financial centre globally.
The construction of GIFT City is still ongoing, but it is expected to be the largest financial centre in the country upon completion. It is designed to be an emerging IT and financial services hub comparable to other globally benchmarked business districts. Additionally, the city will offer a corporate haven akin to Delaware Island while being under Indian jurisdiction. It is located on the banks of the Sabarmati River, linking Ahmedabad’s business capital and Gandhinagar’s political capital in Gujarat state.
GIFT City is envisioned as a global centre for knowledge and innovation, focusing on various services such as asset management, global portfolio diversification, and wealth management.
Tax incentives in the GIFT City
In 2015, GIFT City’s international financial services centre (IFSC) was declared a multi-service Special Economic Zone (SEZ). One of the significant advantages of setting up a business in GIFT City is the tax incentives provided by the Indian government.
Some of the tax incentives provided at GIFT City include:
- Companies operating in GIFT-IFSC are exempt from paying Minimum Alternate Tax.
- Aircraft lease rentals will be exempt from tax
- Aircraft leasing companies shall enjoy tax holidays for capital gains
- No GST will be applicable on services received by these companies
- National or foreign exchanges set up under IFSC will have total tax exemption from Commodity Transaction Tax (CTT), Security Transaction Tax (STT), Dividend Distribution Tax (DDT), Short Term Capital Gain (STCG), and Long Term Capital Gain (LTCG).
Will the GIFT City make India the financial hub of Asia?
GIFT City is India’s first smart city and international financial services centre. The GIFT City has been positioned by the Indian government to become a hub for the fintech industry in the country. GIFT City aims to create a global centre for finance that can compete with other financial centres such as Singapore, Dubai, and Hong Kong.
With the India growth story still running strong, and GIFT City being recognized as an emerging global financial hub, it is an important step towards making India a prominent financial hub in Asia. Of course, much work still needed to be done to achieve this goal.
GIFT City is regulated by the International Financial Services Centres Authority (IFSCA), which oversees the growth and regulation of financial products. GIFT City has also seen growth in financial services exports, accounting for 11% of India’s financial services exports already in 2018-19.
However, there have been some challenges in truly transforming GIFT City into a highlight financial centre of Asia, and many more to counter. Some sources suggest that the location of the ambitious project itself is questionable (‘in the wilderness’ in a dry state, as highlighted in the media). Some others claim there is a mismatch in the audience being targeted and that the incentives aren’t lucrative enough to capture market share from Singapore or Dubai. That’s why the money isn’t coming to India’s new international financial centre.
In conclusion, while GIFT City has the potential to make India a financial hub of Asia, there is still much work to be done to achieve this goal. With continued growth and regulation under the IFSCA and attention to building the necessary infrastructure and attracting financial entities, GIFT City may be on its way to becoming a prominent global financial centre.