GIFT City wants regulatory tweaks to bring IFSC on par with global centres

Strategy head at Gift City said govt, regulators should make the derivative trade more attractive for FPIs

Gujarat International Finance Tec-City Company Limited (Gift) said on Wednesday that a host of regulatory changes will bring India’s first international financial services centre on a par with such well-established centres in Singapore and Hong Kong.

The measures include waiving short-term capital gains tax on derivatives trade, allowing retail investors to trade and removing regulatory hurdles to make it attractive for foreign portfolio investors (FPIs). 

The Gift City management, however, downplayed a slowdown in its revenue due to the present set of regulations. “Out of the first phase of the project, which was to the tune of Rs 20 billion, we have a debt of Rs 12 billion from a consortium of bankers. So the revenue is the remaining sum — Rs 8 billion,” Gift City Managing Director and Group Chief Executive Officer Ajay Pandey said at a press briefing.

“The land was allocated to us in 2011, the international financial services centre (IFSC) started off in 2015 so the point I wanted to make was the growth curve is exactly how it was planned. The lag of three-four years is what we are carrying,” Pandey said.

He said that industry bodies operating in Gift City have made a representation to the finance ministry to exempt short-term capital gains tax on derivatives trades on the IFSC platforms. At present, FPIs pay 30 per cent short-term capital gains, as against zero tax at the centres based in Singapore and Dubai.

“You need to build liquidity in the market that requires participation from all segments. Today, the only segment that participates in the zone is institutional investors and not retailers. So if retail investors are allowed, the markets can move much faster,” Dipesh Shah, head, IFSC and Strategy at Gift City, said.

Shah said the government and regulators should make the derivative trade in Gift City more attractive for FPIs. “How do you bring FPIs directly in Gift City when they have a choice to go to Dubai and Singapore where all sorts of benefits are being offered? Would they be interested to trade here if you levy X number of tax and Y number of processes to be followed?” Shah said.