On 12 November, the International Financial Services Centres Authority (IFSCA) notified its Global In-House Centres (GIC) Regulations to provide a framework for recognition and operation of GlCs. This will enable multinational companies (MNCs) to set up GICs in GIFT City, Gandhinagar for outsourced business functions while leveraging the benefits of cost savings accompanied by improved productivity and high-quality service.
While the GIC Regulations entails the registration process, functioning and operational requirements for a GIC, the IFSCA has also issued a circular, prescribing the format of application form for seeking registration as a GIC and the annual reporting requirement for a GIC.
On 16 October, the Central Government had notified GIC as financial service to provide services relating to financial products and financial services. However, it said that the eligibility criteria would be provided by IFSCA.
Highlights of GIC Regulations
1.Definition of GIC– a unit set up in the International Financial Services Centre (IFSC) for providing support services, directly or indirectly, to entities within its financial services group, including but not limited to banks and non-banking financial companies, financial intermediaries, investment banks, insurance companies, re-insurance companies, actuaries, brokerage firms, funds, stock exchanges, clearing houses, depositories, and custodians, for carrying out a financial service in respect of a financial product.
2.Registration of a GIC
- An applicant desirous of being registered as a GIC shall be required to meet the following eligibility criteria:
It shall exclusively cater to its financial services group wherein the entities served must be located in Financial Action Task Force compliant jurisdictions; and
The support services provided to its financial services group should be for the purpose of carrying out a financial service in respect of a financial product.
- For registration as a GlC, an application in the format prescribed in the circular has to be submitted to IFSCA.
- Additionally, an approval under the Special Economic Zone (SEZ) Act 2005 shall have to be obtained separately from the Development Commissioner SEZ following the prescribed procedure.
3.Functioning of a GIC
- Permissible services and activities- A GIC meeting the eligibility criteria shall provide services to non-resident entities only.
- Currency and mode for conducting business-A GIC shall deal in freely convertible foreign currency only, provided that it may defray its administrative expenses in INR by maintaining an INR account as may be specified by the Authority. It may conduct its business in any mode permitted by IFSCA, including branch mode.
- Reporting requirements- A GIC shall be required to furnish information relating to its operations to IFSCA in such manner and form and at such intervals as may be specified by IFSCA.
- Maintenance of books of accounts, records and documents- A GIC shall maintain its books of accounts, records and documents, in such foreign currency as may be declared at the time of making an application under these regulations.
Benefits for GICs
Units in IFSC can benefit from the generous tax incentives offered, including 100% Income-tax holiday for any 10 consecutive years out of 15 years. Minimum Alternate Tax (MAT) is levied at a concessional rate of 9 % against 15% that is levied on companies in India generally. Security Transaction Tax (STT), Commodity Transaction Tax (CTT), Dividend Distribution Tax (DDT) Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG) are waived off.
Government of Gujarat has also exempted stamp duty for entities having registered office in GIFT for capital market activities.
More details on tax incentives is available here.
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