Setting up Office in IFSC at GIFT City and Necessary Compliances

Earlier this year, Sundar Pichai announced Google’s plan to set up a global fintech office in the GIFT City in Gujarat. Large companies are also making strides towards the GIFT City, as PayTM plans to invest 100 crores and LIC aims to open an office this year in GIFT City. With all the buzz around the newest International Financial Services Centre at the Gujarat International Finance Tec-City (GIFT City) in Gandhinagar, Compliance Calendar brings to you the latest updates on setting up your office in the GIFT City. We also assess the significance of this landmark moment in the Indian financial landscape and also highlight its likely impact on businesses and trade.

GIFT City - A dream place of integrated services

When we think of global finance hubs, the most prominent cities that come to our mind are Singapore and London which provide world class international banking facilities to business and professionals alike. With increasing industrialization, focus on Make in India and Assemble in India, the dream of an integrated and supportive infrastructure of banking, finance, logistics, insurance services were realized with the setting up of the GIFT City.

International Financial Service Centers Authority (IFSCA) under the IFSC Act has been established as a unified interface to govern activities of all units established in IFSC and is vested with necessary powers as granted to SEBI (capital markets), RBI and IRDAI (insurance).

Key Benefits of setting up in the GIFT City Tax benefits under Income Tax

• For units located in GIFT City, a 100% tax exemption for 10 years out of a 15-year block period is available.
• Moreover, minimum alternate tax (MAT) will be levied at a concessional rate of 9% on book profits.
• There is no Dividend Distribution Tax, Security Transaction Tax, Commodity Transaction Tax.
• Dividends received by non-residents from an IFSC unit are taxable at a concessional rate of 10% plus applicable surcharge and cess.
• Interest on Long Term Bonds and Rupee Denominated Bonds listed only on a recognized stock exchange in IFSC: if issued before 01 July 2023 - Taxable at a lower rate of 4%. If issued on or after 01 July 2023 - Taxable at a rate of 9%.

Tax benefits under GST

• For businesses located in GIFT City, there is no GST on services received by the unit as well as services provided to units in the IFSC or those provided to offshore clients.
• GST however is applicable on services provided to Domestic Tariff Area under Reverse Charge Mechanism.
• Other financial benefits: Exemption from stamp duty and registration charges for setting up a business entity at GIFT City. Moreover, there is a customs duty exemption on Inward Supplies.

Non-financial benefits

• These include access to a state-of-the-art integrated infrastructure with plug and play facilities.
• Units in the GIFT City also have access to an integrated ecosystem of banks, insurance, capital markets, law and consultancy firms.
• Additionally, services of the international dispute resolution mechanism through Singapore International Arbitration Centre can be availed.
• Operations such as mergers and acquisitions among transnational companies become easier. Thus start-ups, initial stage companies and mid-level companies find it easier to approach international investors and get acquired.
• Banks set up in the IFSC Centre can trade in foreign currencies in overseas markets and raise funds in foreign currencies as deposits and borrowings from Indian and non-resident sources.

Specific benefits for IT or IT enabled services companies in GIFT City

The government has extended certain special benefits to startups engaged in providing Information Technology and Information Technology Enabled Services. These are available for setting up R&D facilities of IT companies, BPO and KPO units, operation of E-Commerce companies, setting up vertical IT parks as well as web-based, ERP and software application development.

Some of the key advantages for setting up IT units in GIFT City are:

• Stamp duty, registration and conversion fee exemption for developers and units
• Construction Subsidy of 300 per sq ft of built-up area for Vertical IT/Ites Parks
• Reimbursement of Electricity duty and Rs. 1 subsidy on tariff
• Reimbursement of PF contribution by Employer. This includes 100% of EPF amount paid in case of female employees and 75% of EPF amount paid in case of male employees.
• Lease rental subsidy
• Capital subsidy is available for hardware, pietworking etc for up to 1 crore
• Support to R&D Institutions - This includes assistance up to 60% of the project cost, excluding land, subject to a maximum of Rs 50 lakhs
• Market Development Support - This is available to IT MSMEs at the rate of 50% of expenditure towards Creation of stall and on rented space.
• Patent Assistance - Support for applying for patents is available at the rate of 50%, subject to a ceiling of 2 lakhs per patent for domestic patents and 5 lacs per patent for international Patents.

Setting up your business in GIFT City - Compliances and Procedures

The setting up of a business unit has been simplified by integrating various approvals, grant of stamp duty exemptions and several tax benefits as enlisted above. The process of getting started in GIFT City includes the following key compliances:

Initial steps

• A submission of interest through a proposal is required by way of letter or mail to the co-developer for allocation of space in the GIFT SEZ. Post confirmation, the co-developer will issue a Provisional Letter of Allotment (PLOA) to the organization for providing office space for setting up IFSC Unit in GIFT SEZ.
• GIFT One and GIFT Two, each of twenty-eight floors developed by IL&FS are ready and available for use. The developers currently include agencies like the Brigade Group, Prestige Group, SBI, LIC etc.
• Checklist for issuing PLOA:

Online application via NSDL Portal

• The entrepreneur has to submit an application online via Form F through the NSDL portal to the Development Commissioner, KASEZ for taking approval for setting up IFSC Units in GIFT SEZ and submit the hard copy of the documents in one set.
• Documents also need to be submitted to the GIFT SEZ along with copy of project report and other details / information (in quintuplicate)

• Based on the Approval Committee's decision, DC's Office will update the status (approved, rejected or approved proposal with modifications or approved proposal subject to conditions) on the SEZ Online system.
• In case the proposal is approved with modifications/any additional documents or changes or clarifications sought, DC officials will submit such remarks in the SEZ Online system. Replies can be submitted online by the entrepreneur.

SEZ Compliances as per SEZ Rules, 2006

SEZ units have to complete SEZ compliances as per the SEZ rules 2006 and the conditions mentioned in the respective LOA issued by the office of the Development Commissioner, KASEZ.

This also includes executing a lease deed with the Co-developer for the allotted space. A copy of this is required to be submitted to the Development Commissioner’s office within six months from issuance of LOA.

Incorporation of Company

The GIFT City regulations require that the following conditions be met for the purpose of incorporation of a company.

• Director Identification Number (DIN) of two directors, of which at least one Director should be resident in India;
• Number of the Promoters/ Shareholders: Minimum 2 Promoters are required. However, it is advisable to form a 100% subsidiary of Holding company which is already a registered SEBI member in India.
• Valid Digital Signature of at least one director, who is required to have a valid DIN or PAN. Digital signature certificate is also required for availing services of the SEZ Online portal.
• For this purpose, the SPICe+ form which is applicable to all new company incorporations by the Ministry of Corporate Affairs may be utilized.

List of Documents to be submitted to Development Commissioner, KASEZ

1. Provisional Letter of Allotment provided by Co-developer GIFT SEZ.
2. Detailed Project Report – inclusive of projections for five years, and must also include:
• Background of the organization
• Description of services offered in India & Abroad
• Description of proposed Project (Project for setting up Unit in SEZ)
• Revenue Projections i.e. Net Foreign Exchange Earnings projection for forthcoming Five Financial years
• Description of Foreign Technical Collaboration, Marketing Collaboration (If any, Nature of agreement, Duration of agreement, Payment to consultant)
• Existing and proposed financing structure over a period of 5 years

Note - A detailed project report incorporating all relevant information on the project & giving therein feasibility report, promoters/directors details, cost of the project and means of finance with break up details, projected profitability statement.

Along with the printout of “Form F”, entity is required to submit the following additional documents:

• Demand Draft of Rs. 5000/- in Favour of REGIONAL PAY AND ACCOUNTS OFFICER MUMBAI payable at GANDHIDHAM

• Provisional Letter of Allotment issued by the Co-Developer.

• Detailed Project Report – inclusive of Projections for 5 years (Annexure 1)

• Company ID’s such as License, PAN Card, IEC Code etc

• Memorandum of Association, Articles of Association

• Board Resolution for setting up office in GIFT IFSC

• Certificate of Incorporation

• List of Directors with their Identity proofs

• Last 3 Years IT return of the Company or Directors.

• Brief Presentation covering the Company profile and scope of activities to be carried out from GIFT IFSC.

• AFFIDAVIT (Proforma described in Annexure-i)

The above documents are required to be prepared in 3 Sets & submitted as mentioned below i.e.

• Original set to be submitted to the Office of the Development Commissioner & Second set to be submitted to GIFT SEZ Authority

1. Post the submission of application, applicant would be requested to attend “Unit Approval Committee” (UAC) meeting headed by Development Commissioner and present proposed activities.
2. On approval from UAC, the unit will get Letter of Approval (LOA) from the office of Development Commissioner.
3. After this, the Unit will be required to do the following:

• Submit LOA Acceptance Letter to the DC office within 45 days of LOA.
• Registration in SEZ Online system, through which the Form F was created.
• FCA Account opening
• Execute Bond cum Legal Undertaking with the Development Commissioner & Specified Officer, GIFT SEZ & submit the same to DC office.
• GST Registration.
• IEC Registration
• RCMC Registration.
• Procurement of assets like Computers, servers, furniture etc
• Application for Electricity & Internet connections.
• Application for Identity Cards of employees from SEZ Customs.

Note: After completing the above, the unit will be eligible to start its business operations (export of services). It is mandatory to intimate the date of first export of service to the Office of Development Commissioner, through an application containing subject line “Commencement of business operations” with a supporting evidential document like Tax Invoice. Please mark a copy to GIFT SEZ Developer also.

Bond Cum Legal Undertaking (BLUT) via Form H
For implementation of the LOA, the unit must execute Bond cum legal undertaking in form- H of SEZ Rules on a non-judicial stamp paper of Rs. 100/- bought from within the state i.e. Gujarat where the SEZ/unit is located and also get the same notarized by a Notary Public registered from the same State i.e. Gujarat.

Obtaining mandatory Registration-cum- Membership-Certificate (RCMC)

A mandatory Registration-cum- Membership-Certificate (RCMC) is required to be obtained from Export Promotion Council for SEZ units or developer (including co-developer) and the Export Oriented Units (EOUs) to avail exemptions, drawbacks and concessions under Rule 22 of SEZ Rules.

Obtaining a GST registration

GST registration for SEZ Unit under the IGST Act and Rules if applicable, and updating of the new premises is required.

Obtaining Import Export Code

An IEC Code is required for operating in the GIFT City.

SOFTEX form for software export

Units undertaking export of software in non-physical form e.g. through data link, internet, e-mail or any other electronic mode, are required to submit Software Export Declaration Form (SOFTEX) on a monthly basis to the DC's Office.

Final approvals to be submitted to Development Commissioner, KASEZ

Submission of self-attested copy of final Approvals/ Permission from SEBI/IRDA/RBI to the Development Commissioner(DC) , KASEZ - Ahmedabad & GIFT SEZ Ltd. Submission of self-attested copy of Lease deed to the DC, KASEZ office Ahmedabad by SEZ Unit. (Provided further that a copy of the registered lease deed shall be furnished to the Development Commissioner concerned within six months from the issuance of the Letter of Approval. In case of failure to do so, the Approval Committee may take action to withdraw the Letter of Approval after giving an opportunity of being heard;)

Opening of Bank Account with IFSC Banking units

Common Document List for Bank Account

• Account opening form for IFSCA Banking Unit (IBU)
• FATCA Annexures
• Board Resolution
• Latest List of all Directors with their addresses, DOB, Nationality, signed and dated by the Company Secretary / Director(s) preferably as per (Annexure CA-3)
• Proof of appointment of directors which are mentioned in latest list of directors and appointed after incorporation will be required, also Proof of resignation of Director(s) is required if latest list of directors does not have the name of the Director/s as per first list of directors available in MOA/AOA
• Permanent Account Number (PAN) is mandatory except for newly incorporated companies request for account opening within 90 days of Incorporation. Form 49 (A) in the name of company to be taken in such cases and the form 60 to be filled
• Constitution Documents:
  1. Copy of Certificate of Incorporation (COI) with proper stamp & signature of Registrar
  2. Copy of Certificate of Commencement of Business (COB) with proper stamp & signature of Registrar / Form INC 21 with ROC receipt in case of Public limited. (The same is not a requirement for companies incorporated after May 26, 2015)
  3. In case of conversion, amended copy of COI issued by Registrar of Companies (ROC) along with copy of MOA/AOA will be required.
  4. Memorandum of Association (MOA),
  5. Articles of Association (AOA)
• Identity Proof Document for Authorized Signatories self-attested under Entity's Round/ Rubber Stamp/ Seal
• Aadhaar consent to be mentioned on Aadhaar (if provided as KYC proof) that it is voluntarily submitted for account opening from Authorized signatory/beneficial owner (applicable for Resident Individual) (First 8 digit of Aadhaar number shall be blacked out/redacted
• Communication Address Proof in the name of company to be collected, if address is different / not mentioned in COI.
• Registered Address Proof in the name of company to be collected, if address is different from document collected under point 7(a)-(b) or 9. Form 18 / INC 22 with ROC acknowledgment or downloaded from MCA website can be accepted as registered address proof.
• No-Objection Certificate (NOC) from the lending bank(s) if the entity / constitution is enjoying credit facilities (fund based or non-fund based).
• Beneficial Ownership Information i.e., Shareholding Pattern of the company will be required as per Annexure CA-4.
• KYC (Id & Address document) for all shareholders with 10% or more for individual shareholders, authorized signatories.
• Completed KYC report and owner KYC report. For Bank RM
• For all SEZ units situated in India, SEZ status proof or IEC Certificates and SEZ Developers, IFSCA NOC, Kasez approval, copy of notification is required.

*Kindly note documents are subject to review, and we may ask for further information if required.

• Kindly note all documents needs to be signed, stamped & dated.
• KYC docs need to be self-attested, dated and stamped (OSV by RM)
• For non-resident, customer needs to provide equivalent notarized documents
• Bank may demand additional documents over and above these

Frequently Asked Questions

• What are the mandatory charges payable for registration on the SEZ Online portal?
  Every unit user has to pay through SEZ Online system an amount of 35,000/- which includes the following:

1. One time Registration charge of 25,000
2. Annual system usage charges of 10,000

• Can foreign companies set up operations in GIFT City?

Yes, GIFT City welcomes both domestic and international companies. Foreign companies can establish operations in GIFT City, taking advantage of the business-friendly environment and incentives offered.

• What types of businesses are encouraged to set up in GIFT City?

GIFT City with its aim of creating a sustainable, transparent and inclusive framework is particularly focused on attracting businesses in the financial services, banking, insurance, asset management, and technology sectors. It aims to create a diversified business ecosystem in India with a global outlook.

With infrastructural access and tax advantages, setting up a successful business in India through the SEZ route in GIFT city is a worthwhile alternative to explore. Having assisted diverse corporate clientele in drafting user-agreements, incorporating a company in India and securing mandatory licenses, Compliance Calendar’s bouquet of services are unparalleled in helping you setting up your business in the GIFT City, Gujarat.