Finance companies/corporate treasury activities:
GIFT IFSC facilitates the setup of Finance companies for borrowing, lending, and corporate treasury operations. Within the Finance company framework, one of the permitted activities is corporate treasury, which authorizes set up of units in GIFT IFSC by global players (i.e., entities outside India) and Indian players with global operations. The key benefits of treasury centers are:
- Dealing in foreign currency without applicability of FEMA for transactions undertaken outside India
- 10-year tax holiday for business income
- Interest payments to lenders of financial institutions outside India are exempt from tax
Non-financial services entities can also set up corporate treasury units. Setting up of corporate treasury centers in the GIFT IFSC may create plenty of opportunities for Indian and global MNCs to centralize treasury operations and effectively manage liquidity, along with tax benefits and reduced operational costs, which are added advantage.
Aircraft leasing
India's aviation sector is thriving, leading to higher demand for aircraft. Previously, Indian firms leased from jurisdictions with tax advantages. With favorable regulations and taxes, GIFT IFSC offers a lucrative aircraft leasing opportunity. Presently there are 15+ aircraft leasing entities registered in GIFT IFSC. Basis public information, around 25+ assets such as fixed-wing aircraft, helicopters, engines, and ground support equipment are leased from GIFT IFSC. Air India has set up an entity in GIFT IFSC for leasing aircraft. Considering the boom in market and favorable regime in GIFT IFSC, this may be the right time for aircraft leasing entities to capitalize on this opportunity.
Listing on international exchanges in GIFT IFSC
The Finance Ministry announced for allowing Indian entities to list on international exchanges, including IFSC exchanges. The formal notification is still awaited. Once notified, the unlisted companies including Indian start-ups shall be able to list on IFSC exchanges. Presently, Indian companies have done secondary listing of bonds of over US$52 billion on the IFSC Exchanges. As regulations evolve, IFSC exchanges are ready to be dynamic hubs for capital raising, global investment, and strategic growth across diverse companies.
The Government of India recognizes that in a globalized world, global capital will act as an important driver of economic growth and a strong financial sector would be a key constituent in India’s growth story. GIFT IFSC is expected to play a pivotal role in this journey by tapping global capital flows to meet India’s development needs and provide a globally competitive financial platform for the full range of international financial services. Recent developments only seek to reinforce the enormous potential and opportunities that GIFT IFSC offers for investors.
This article is authored by Jaiman Patel, Partner, International Tax and Financial Services sector, EY India. The article is also contributed by Cheryl Jagtap, Senior Manager, Global Compliance and Reporting and Anvesh Desai, Senior, Indirect Tax, EY India have also contributed to this article.