GIFT CITY – A LEGAL PERSPECTIVE
IFSC GIFT City is an initiative by the Gujarat Government and the Government of India (GOI) to establish a financial hub for the developing country. Their objective is to open gates for more foreign investments and institutions. This would also allow India to compete with other global financial centres, strengthening India’s position in the global economy. GIFT City hosts various financial institutions like Indian and foreign banks, insurance providers, asset management companies, FinTech hubs, international exchanges, capital market investment companies, etc.
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Legal framework
The GOI approves and regulates IFSCs under the Special Economic Zone (SEZ) Act 2005. GIFT City has been approved as a multi-service SEZ, also known as GIFT SEZ.
Gift City is a centre of attraction for investors and businesses due to its strategic access to India’s expansive and dynamic market; it has several advantages, such as the Special Economic Zone (SEZ). This SEZ status offers various incentives, such as tax exemptions, making Gift City a favourable destination for companies aiming to establish a presence in India. The city operates under a robust legal framework that ensures clarity and stability for businesses and investors, following a standard law system designed to be business-friendly. Taxation in Gift City includes substantial benefits like income tax exemptions, a unique GST regime providing certain exemptions, and stamp duty exemptions on various financial transactions; such transitions increase profitability and invite more investors around the globe.
Further, navigating the way toward the regulatory landscape of Gift City includes understanding the key regulatory authorities that govern its financial activities. The Gujarat International Finance Tec-City Authority (GIFTCA) oversees the city’s overall functioning, ensuring compliance with international best practices while maintaining its tax-efficient status. The Securities and Exchange Board of India (SEBI) regulates securities and capital market activities. In contrast, the Reserve Bank of India (RBI) governs banking and financial institutions, for functions related to insurance are managed by the Insurance Regulatory and Development Authority of India (IRDAI), ensuring market integrity and consumer protection. Additionally, the International Financial Services Centre Authority (IFSCA) is exclusively established to regulate various financial services within Gift City, adhering to international standards. This comprehensive regulatory framework promotes transparency and creates an investment-friendly environment, attracting opportunities at global financial services, commodity and derivatives markets, and Alternative Investment Funds (AIFs), thereby positioning Gift City as a hub for diverse economic activities.
SWOT analysis of the opening of Gift City
SWOT analysis will refer to the effect (SWOT) of the Gift City’s development. It has hard pros and cons, as reflected in the analysis below. The effect might be positive or negative, depending on how the market treats it. The analysis mentioned below is just an assumption and not an accurate picture because it is not Primary Research.
Strengths:
Strategic Location: GIFT City is strategically located near Ahmedabad and Gandhinagar, providing connectivity to key business and political centres in Gujarat
Infrastructure: The city boasts cutting-edge infrastructure, including a dedicated SEZ for international operations and state-of-the-art utilities like electricity, telecommunications, and solid waste management
Regulatory Environment: GIFT City offers globally benchmarked regulations, taxation, and policies supported by the Government of India and Gujarat, attracting businesses and investors
Employment Generation: The establishment of an IFSC in GIFT City is expected to create employment opportunities and enhance economic activity
Weaknesses:
Development Stage: GIFT City is still under construction, with some areas yet to be fully developed, potentially impacting its immediate operational capacity. As of 2019, around 780,000 square meters of built-up area had been allotted out of the 1,200,000 square meters available for commercial, residential, and social use.
Brand Recognition: Despite its potential, GIFT City may face challenges in establishing itself as a recognized global financial hub compared to established centres like Singapore and Dubai
The established infrastructure is high-maintenance, requiring regular updates, repairs, and enhancements essential to maintaining the city’s cutting-edge facilities and services.
Opportunities:
Attracting Businesses and Investments: GIFT City presents opportunities for companies looking to expand internationally, especially those facing land constraints in other countries like Singapore, which would increase foreign direct investment. The city aims to attract global and domestic business enterprises, offering a plug-and-play infrastructure for accelerated growth.
Becoming a Flagship for Smart Cities: GIFT City is envisioned as a flagbearer for smart cities in India and a benchmark for finance and technology hubs worldwide.
The emergence of New Sectors: The city aims to attract various sectors, including banking, capital markets, fund management, insurance, bullion, finance companies, aircraft leasing, ship leasing, global in-house centres (GICs), FinTech, foreign universities, and ancillary service
Threats:
Increase in Competition: GIFT City faces competition from established global financial centres, which may pose a challenge in attracting businesses and investors away from these more recognized hubs and would even pose harm to Indian companies.
Regulatory Challenges: Ensuring a conducive regulatory environment and addressing any regulatory hurdles could be crucial to the sustained growth and success of GIFT City
Delays and Cost Overruns: The project has faced some delays in the past, with the Government of Gujarat State buying out the 50% stake of Infrastructure Leasing & Financial Services (IL&FS) in 2018 to minimize delays
Cost overruns could also impact the project’s viability.
Offices opened
Offices Opened refers to the development of offices opened through an FDI; Foreign Investment offices will be directly proportionate to the development of the economy. The concept of FDI caters to the core fundamentals of Economic Development. Many known companies have established offices in GIFT City, Gandhinagar. Bank of America unveiled a Global Business Services Centre, while Accor introduced the city’s hotel on January 6, 2020. In July 2022, JPMorgan Chase, Deutsche Bank, Mitsubishi UFJ Financial Group, and Singapore Exchange set up offices at the International Financial Services Centre. This is also where India’s inaugural international bullion exchange began operations. Capgemini, a multinational technology services and consulting company from France, opened an office on November 24, 2022. Following suit was Allianz Partners, a company based in France that launched its IFSC Insurance Office on November 30, 2022 – marking itself as the reinsurer at IFSC. These developments highlight GIFT City’s growing importance as a centre for institutions, insurance firms, exchanges, and technology companies.
Legality of Opening of Foreign Institutions
Commencing foreign institutions in GIFT City involves a structured process and regulatory framework. Foreign universities are granted GIFT IFSC registration for a term of five years, which is renewable for an additional five years.
The International Financial Services Centres Authority (IFSCA) has rolled out the International Financial Services Centres Authority (Setting up and Operation of International Branch Campus and Offshore Education Centre) Regulations, 2022 (IBC-OEC Regulations). These rules pave the way for esteemed foreign universities and educational institutions to shop in GIFT City as an International Campus (IBC) or an Offshore Educational Centre (OEC). These regulations apply to foreign universities ranked within the top 500 globally or featured in the latest QS World Universities Ranking. Registration under these regulations is initially granted for five years and can be renewed for another five years. Additionally, any course or program offered by an IBC or OEC in GIFT City must be identical to those provided by the foreign university in its home country.
IBC-OEC Regulations for Gift City
The International Financial Services Centres Authority (IFSCA) has rolled out the International Financial Services Centres Authority (Setting up and Operation of International Branch Campus and Offshore Education Centre) Regulations, 2022 (IBC-OEC Regulations). These rules pave the way for esteemed foreign universities and educational institutions to shop in GIFT City as an International Campus (IBC) or an Offshore Educational Centre (OEC). These regulations apply to foreign universities ranked within the top 500 globally or featured in the latest QS World Universities Ranking. Registration under these regulations is initially granted for five years and can be renewed for another five years. Additionally, any course or program offered by an IBC or OEC in GIFT City must be identical to those provided by the foreign university in its home country.
The main aim of the Regulations is to facilitate the establishment of international branches either independently or in other forms permitted by the IFSCA. These regulations foster research in banking, insurance, capital markets, funds management, and fintech, generating high-end human resources for finance, technology, and related fields. The IBC-OEC Regulations provide a supportive regulatory environment, making it easier for foreign universities and educational centres to operate in GIFT City. These regulations create opportunities for top global universities to set up campuses in GIFT City, India’s first International Financial Services Centre, promoting education and research in finance and technology.
Conclusion
Gift City opens the door to a new era of holistic development, which refers to economic, Infrastructural, etc. The implantation of Gift City led an arrow toward the increase in FDIs and had a more significant impact on the world economy. A small development has a more substantial effect in the long run; this small development can assume progress, as it has an implied impact on structural and economic development. The need for development has recently become a must; the country has to showcase its uniqueness to survive in the market, or it will deter business. The process of showcasing the development differs from country to country, but the intention remains the same.
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