This presentation gives a detail guidelines about what is IFSC (International Financial service centres) and how it will function and what will be the impact on capital market intermediaries

1. BSE Brokers meet on
business prospects in
IFSC at New Delhi
Date: 30.09.2016
By Ashish Jhagarawat
Director and CEO
MOON SEZ Consultants Pvt Ltd
Contact: +91 9373618577, email: ashish@sezindia.co.in

2. Agenda for this evening
1
Regulatory framework
• What is SEZ?
• What is IFSC? And Salient features of IFSC
• Progress made so far
• Comparison between tax incentives of SEZ & IFSC
2
What is there for Capital Markets Intermediaries
• Types of Intermediaries allowed
• Permissible securities
• Nature of clients
• Approval process
3
Business Opportunities
• Business Opportunities from IFSC in India
• Questions

3. The biggest risk in Life is
“Not to take
any
risk at all”

4. Regulatory Framework
01

5. What is SEZ?
• SEZ is a specially designated duty free enclave deemed to be a foreign territory for the
purpose of trade operations, duties and tariffs.
• A Special Economic Zone (SEZ) is a geographical region that has economic laws more
liberal than rest of the country’s general economic laws.
• SEZ Act and Rules were framed to attract foreign investments into India, encourage
exports from India to bring in more and more foreign exchange into India.
• All Goods and services supplied from Domestic Tariff Area (DTA) to SEZ are treated as
exports and all Goods and services supplied by SEZ units to Domestic Tariff Area (DTA)
are treated as imports into India and subject to all procedures and rules applicable in
case of normal imports into India.
• SEZ’s are deemed to be a airport, port, Land Custom stations, and Inland container
depot under the Customs Act.
• SEZ Developers/Co-developers/Units are entitled for various fiscal/Non Fiscal
incentives and benefits as per SEZ Act and Rules.
• Manufacturing, Servicing, trading, re-conditioning, repair etc are allowed in the SEZ’s.
• SEZ policy was introduced in year 2000 under Export Import Policy, However SEZ Act
was enacted in 2005 and passed by Parliament and rules was framed in 2006.
SEZ
DTA (Domestic
Tariff Area)

6. What is IFSC?
SEZ
DTA (Domestic
Tariff Area)
IFSC
• Definition of IFSC as per SEZ Act: As per Section 2 (q) of SEZ Act, 2005, “International
Financial Services Centres” means an International Financial Services Centre which
has been approved by the Central Government under sub-section (1) of Section 18 of
SEZ Act, 2005.
• As per Sub section (1) of Section 18 of SEZ Act, 2005, The Central Government may
approve the setting up of an International Financial Service Centre in a Special
Economic Zone and may prescribe the requirements for setting up and operation of
such centre.
Provided that the Central Government shall approve only one International Financial
Services Centre in a Special Economic Zone.
• As per Sub section (2) of Section 18 of SEZ Act, 2005, The Central Government may,
subject to such guidelines as may be framed by the Reserve Bank, the Securities and
Exchange Board of India, the Insurance Regulatory and Development Authority and
such other concerned authorities, as it deems fit, prescribe the requirements for
setting up and the terms and conditions of the operation of Units in an International
Financial Services Centre.

7. Salient Features of IFSC
SEZ
DTA (Domestic
Tariff Area)
IFSC
• An IFSC caters to customers outside the jurisdiction of the domestic economy. Such centres deal
with flows of finance, financial products and services across borders. London, New York and
Singapore can be counted as global financial centres. Many emerging IFSCs around the world,
such as Shanghai and Dubai, are aspiring to play a global role in the years to come.
Salient Features of IFSC in India: As per Foreign Exchange Management (International Financial
Service Centre) Regulations, 2015 dated: 02.03.2016
1. Any financial institution or branch of a financial institution set up in the IFSC and
permitted/recognised as such by the Government of India or a Regulatory Authority shall be
treated as a person resident outside India.
2. A financial institution or branch of a financial institution shall conduct such business in such
foreign currency and with such persons, whether resident or otherwise, as the concerned
Regulatory Authority may determine.
3. Subject to the provisions of Section 1(3) of the Act, and save as otherwise provided in these
Regulations or any other Regulations or directed by the Reserve Bank of India from time to
time, nothing contained in any other regulations shall apply to a financial institution or branch
of a financial institution set up in an IFSC.

8. Announced IRDA (IFSC) Guidelines,
2015
IRDA
Announced SEBI (IFSC)
Guidelines, 2015
SEBI
Foreign Exchange Management
(International Financial services
Centre), Regulations, 2015 were
issues
RBI
Announced outlines of IFSC
Ministry of Finance
06.04.15
27.03.15
02.03.15
01.03.15
Progress So far- Post budget 2015
01.04.15
Guidelines for setting up IFSC
Banking Unit (IBU) were
announced
RBI
Laid down guidelines for setting up
an IFSC units in SEZs
Ministry of Commerce
08.04.15 Budget 2016
Reduction of MAT
from 18.50% to 9%,
Exemption from
STT, CTT, Long
Term capital gain
tax and DDT
Union Budget
2016

9. Comparison between SEZ and IFSC on Taxation
front
SEZ IFSC
During
development,
Construction
and operation
stage
SEZ Units IFSC Units
Exemption from:
1. Custom Duty & Excise Duty
2. Central Sales Tax
3. Service Tax
4. Exemption from VAT, Stamp duty etc. as per State Govt.
Policy
Exemption from:
1. Custom Duty & Excise Duty
2. Central Sales Tax
3. Service Tax
4. Exemption from Securities transaction tax leviable
under sec. 98 of Finance (No. 2) Act, 2004, Commodity
Transaction Tax, Long Term capital gain tax and
Dividend distribution tax
5. Exemption from VAT, Stamp duty etc. as per State Govt.
Policy
For First 5 years- 100% of eligible profits or gains.
For Next 5 years- 50% of eligible profits or gains.
For Next 5 years- 50% of the ploughed back export profits
For First 5 years- 100% of eligible profits or gains.
For Next 5 years- 50% of eligible profits or gains.
MAT is applicable at the rate of 18.5% (Surcharge, cess extra) MAT is applicable at the rate of 9% (As per Union Budget
2016)- Surcharge, cess extra
Income tax
holidays
MAT

10. What is there for capital
market Intermediaries
02

11. Intermediaries allowed
To set up operations
In IFSC for rendering
Financial services
relating to securities
market
A trustee of trust deed
A registrar to an issue
A share transfer
agent
An underwriter
A portfolio
manager
A depository
participant
A custodian of
securities.
A stock broker and
sub-broker.
A foreign portfolio
investor
A merchant
banker
A banker to
an issue
An investment
advisor
A credit rating agency
Any other intermediary or
any person associated with
the securities market as may
be specified by the board
from time to time
Stock Exchanges, Clearing
Corporations, Mutual funds,
Alternate Investment Funds

12. Permissible Securities
The stock exchanges operating in IFSC may permit dealing in following types of securities and products
in such securities in any currency other than Indian rupee, with a specified trading lot size on their
trading platform subject to prior approval of the Board:
• Equity shares of a company incorporated outside India;
• Depository receipt(s);
• Debt securities issued by eligible issuers;
• Currency and interest rate derivatives;
• Index based derivatives;
• Such other securities as may be specified by the Board;
• Commodity Derivative (As per SEBI Circular No. CIR/MRD/DSA/41/2016 Dated: 17.03.2016)

13. Nature of Clients
Nature of clients to whom an Intermediary in IFSC can provide financial services:
(i) a person not resident in India;
(ii) a non-resident Indian;
(iii) a financial institution resident in India who is eligible under FEMA to invest funds offshore, to the
extent of outward investment permitted;
(iv) a person resident in India who is eligible under FEMA, to invest funds offshore, to the extent
allowed under the Liberalized Remittance Scheme of Reserve Bank of India, subject to a minimum
investment as specified by the Board from time to time:
Provided that clients referred to in clauses (ii) to (iv) may be provided services, subject to guidelines of
Reserve Bank of India.

14. Approval Process
After provisional allotment of
space, apply for company
formation with ROC and
obtain certificate of
Incorporation and also apply
for PAN Card allotment
Representation before unit
approval committee, if no
query found on scrutiny of
application
Issuance of Letter of Approval
(‘LOA’) as per SEZ Act, 2005
and Rules, 2006 and submission
of acceptance letter
Application to be made to
Regulatory authority such as
RBI, SEBI, IRDA of India as the
case may be for setting up
operations in IFSC
7
Execution of Bond Cum Legal
undertaking in accordance to
SEZ Act and Rules for availing
various types of benefits
available under SEZ policy
8
After name availability
confirmation from ROC
(Registrar of companies),
obtain NOC from GIFT SEZ or
any co-developer for usage of
GIFT address for incorporation
2
Apply for name availability for
incorporating new
company/LLP with ROC for
setting up IFSC unit including
(IFSC) word as a part of name
1
Post formation of
company/LLP an application
is to be made to the concerned
Development Commissioner
of SEZ for unit
3
46 5

15. Business Opportunities
03

16. Business opportunities in IFSC
Major business opportunities in IFSC:
• Fund-raising services for individuals, corporations and governments.
• Asset management and global portfolio diversification undertaken by pension funds, insurance companies and mutual
funds.
• Wealth management.
• Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial
intermediaries, accountants and law firms.
• Global and regional corporate treasury management operations that involve fund-raising, liquidity investment and
management and asset-liability matching.
• Risk management operations such as insurance and reinsurance.
• Merger and acquisition activities among trans-national corporations.
• Exchanges, Brokerage services.
• Corporate Banking, servicing JV/WOS of Indian cos registered abroad, factoring/factoring of export receivables.
• Fund accounting, investment services, custodian services, Trust services etc
However for all purposes transactions can happen in currency other than Indian Rupee and with Non residents only (Except as
permitted under FEMA norms and LRS scheme).

17. ?