Budget 2016: 9% tax rate regime for India’s first International Financial Centre
The pet project of Prime Minister Narendra Modi – the International Financial Services Centre (IFSC) – housed in the Gujarat International Finance Tec City – has received a boost in the Union Budget 2016/17.
The long pending tax issue has been decided with 9 per cent minimum alternate tax (MAT), which is a big reduction from the existing 18.5 per cent. The success of GIFT depends a large extent on the tax structure as global financial centres of Dubai, Singapore, Malaysia, Hog Kong have a very liberal tax regime from zero to 10 per cent. Dubai financial centre is zero tax. Malaysia is 3 per cent. Singapore has recently increased its tax rate from 5 per cent to 10 per cent.
The clarity on tax will also speed up the Mumbai’s plan to set up an IFSC in the Bandra Kurla Complex.
Jaitley has also waived off the security transaction tax, commodity transaction tax and long term capital gains tax. The dividend distribution tax has also been abolished. These exemption swould give a fillip to financial markets especially equity, debt, commodity and foreign exchange. In fact, within months of Modi taking over, the RBI, Sebi and IRDA have issued a regulatory framework for operating bank branches, run stock exchanges and insurance business.
IFSC is designed as a deemed foreign territory offering low tax taxation and also a separate (faster) dispute resolution system. The ambitious Gift project, spread close to 900 acres, has a multi-service special economic zone, which also houses the IFSC The IFSC will have commodity exchanges, equity exchanges, offshore banking, KPO, BPO, data centre, etc. There is also a domestic finance centre and space for other infrastructural facilities (housing, club, hotels) for people who will work at the IFSC.
In the banking space, Yes Bank and Federal Bank have already started operations, while the two largest banks – State Bank of India and ICICI Bank will be staring their operations soon. in Today many banks have signed up for space in the IFSC. Those who will soon start are Bank of India, Bank of Baroda, Corporation Bank, Punjab & Sind Bank, HDFC Bank, Kotak Bank, IndusInd Bank, LIC, stock exchanges, Hiranandani, Bangalore-based Brigade etc., Ahmedabad based Sterling Group, Noida-based World Trade Centre and Tata Communications.