THE REGULATORY FRAMEWORK OF INTERNATIONAL FINANCIAL SERVICES CENTERS IN INDIA: AN ODE TO COMMERCIAL JOY
The concept of International Financial Services Centres (IFSC) was introduced in India in 2007 by the High Power Expert Committee’s report on making Mumbai an International Financial Centre (MIFC report).1 Historically speaking, the MIFC report provides that London originated as the first IFSC augmented inter alia by the rapid growth in technology and the free flow of capital across borders; this ushered in the age of universal capital convertibility. Disrupted by the two World wars, New York rose to the pedestal as the dominant IFSC. The historical account in the MIFC report provides a market oriented explanation of an IFSC over IFSCs developing as strategic infrastructural projects that serve as investment hubs primarily for the derivative market of foreign securities.
The first legal enactment for IFSCs in India was announced in the 2016-17 budget speech where the Honourable Finance Minister, Mr. Arun Jaitley, provided tax concessions to units operating in IFSCs.2 The said concessions have been included in the Finance Act, 2018. IFSCs are initiatives to incentivize the exchange of foreign securities in India where the financial services sector accounts for 5% of the GDP.3 Gujarat International Finance Tech (GIFT) in Gandhinagar, Gujarat holds the title of the first IFSC to be set up in India. Apart from tax incentives and regulatory exemptions, an IFSC can be best described as a commercial haven catering essentially to non-residents in commodities of foreign currencies.
It is thus an exemplification of Ease of Doing Business policy for those who intend to operate in the form of an IFSC. The paper shall be restricted to the regulatory framework and the benefits of setting up businesses in an IFSC. The paper shall not deal with the potential success or failure of the GIFT initiative.