End to End Checklist for GIFT City

End to End Checklist for GIFT City

End-to-End Compliance in GIFT IFSC and SEZ – Detailed Checklist for Businesses
Setting up an entity in GIFT City, whether under the IFSC or SEZ framework, involves continuous regulatory, tax, and operational compliance. While the benefits are significant, they are conditional upon strict adherence to prescribed requirements.
This checklist provides a comprehensive overview of key compliances that must be considered at various stages—setup, operational, and ongoing.

A. Pre-Setup Compliance (Applicable to IFSC and SEZ)

Before establishing an entity in GIFT City, the following foundational aspects must be addressed.
The business model should be clearly defined, including the nature of activities, target market (domestic or international), and revenue streams. A detailed feasibility analysis should be undertaken to evaluate whether IFSC or SEZ is the appropriate structure.
Entity structuring must be finalized, including selection of legal form such as company, LLP, or trust (in case of AIFs). Shareholding pattern, control structure, and funding arrangements must be documented.
Regulatory applicability must be examined, including identification of approvals required from IFSCA (for IFSC) or Development Commissioner (for SEZ), along with FEMA considerations for foreign investment.
A detailed project report or business plan is generally required, particularly for SEZ approvals and certain IFSC registrations.

B. Setup Stage Compliance

1. Incorporation and Registration

The entity must be incorporated under the Companies Act or LLP Act, as applicable.
For IFSC entities, registration with the International Financial Services Centres Authority (IFSCA) must be obtained under the relevant regulations, such as Fund Management Regulations.
For SEZ units, approval must be obtained from the Development Commissioner, followed by execution of lease agreement with the SEZ developer.

2. Infrastructure Setup

Office space must be secured within GIFT City premises. For IFSC entities, this is critical to demonstrate operational substance.
Basic infrastructure, including IT systems, communication facilities, and security protocols, must be established.

3. Bank Account and Financial Setup

Bank accounts must be opened, typically in IFSC Banking Units (IBUs) for IFSC entities.
Foreign currency accounts may be required depending on the nature of transactions.
Accounting systems must be set up in compliance with applicable standards.

4. Tax Registrations

GST registration must be obtained, where applicable.
Import Export Code (IEC) may be required for SEZ units.
Other registrations, such as Professional Tax, Shops and Establishment, and labour law registrations, must be completed as applicable.

C. Operational Compliance – IFSC Entities

1. Regulatory Compliance (IFSCA)

Adherence to conditions of registration under IFSCA regulations is mandatory.
Periodic reporting to IFSCA must be undertaken, including submission of returns, disclosures, and compliance certificates.
Any change in structure, management, or activities must be reported and approved where required.

2. Substance Requirements

Maintenance of adequate substance in IFSC is critical.
This includes:
  • Presence of qualified personnel
  • Conduct of key management decisions within IFSC
  • Maintenance of office and operational infrastructure
Failure to meet substance requirements may result in denial of tax benefits.

3. Tax Compliance

Income-tax compliance, including filing of returns and claiming benefits under section 80LA, must be ensured.
Transfer pricing provisions may apply in case of cross-border transactions.
GST compliance may be applicable depending on the nature of services.

4. Fund-Specific Compliance (for AIFs)

Compliance with fund documentation such as Private Placement Memorandum must be ensured.
Investor onboarding must comply with KYC and AML requirements.
Valuation, audit, and reporting obligations must be fulfilled periodically.

D. Operational Compliance – SEZ Units

1. Net Foreign Exchange (NFE) Requirement

SEZ units must maintain positive Net Foreign Exchange over the prescribed period.
Proper tracking of export and import values is essential.

2. GST Compliance

Supplies to SEZ are zero-rated, and proper documentation must be maintained.
Domestic supplies must be treated as imports (for goods) or taxable supplies (for services), and compliance must be ensured accordingly.

3. Customs Compliance

Imports and domestic clearances must comply with customs procedures.
Documentation such as Bill of Entry must be properly maintained.

4. SEZ Reporting

Annual Performance Report (APR) must be filed with the Development Commissioner.
Periodic returns and declarations must be submitted as required.

E. Common Compliance for Both IFSC and SEZ

1. Accounting and Audit

Books of accounts must be maintained in accordance with applicable laws.
Statutory audit must be conducted annually.
In certain cases, internal audit or regulatory audit may also be required.

2. FEMA Compliance

Foreign investment and cross-border transactions must comply with FEMA regulations.
Reporting requirements, including filings with RBI or authorized dealers, must be completed.

3. Corporate Law Compliance

Regular compliance under the Companies Act or LLP Act must be ensured.
This includes board meetings, annual filings, maintenance of statutory registers, and event-based compliance.

4. Employment and Labour Laws

Compliance with labour laws, including payroll, provident fund, employee state insurance, and other applicable regulations, must be ensured.

F. Ongoing Monitoring and Governance

A robust compliance monitoring system must be established.
Periodic internal reviews should be conducted to ensure adherence to regulatory requirements.
Documentation must be maintained in an organized manner to facilitate audits and regulatory inspections.

Conclusion

Compliance in GIFT City is comprehensive and continuous. While the regulatory framework is designed to facilitate ease of doing business, it also requires disciplined adherence to multiple laws and regulations.
A structured approach to compliance is essential to ensure that the benefits of operating in IFSC or SEZ are fully realized without exposure to penalties or regulatory action.

How We Can Assist

At Brijesh Thakar & Associates, we assist clients in setting up and managing end-to-end compliance for IFSC and SEZ entities, including regulatory approvals, tax compliance, and ongoing monitoring frameworks tailored to the specific business structure.
 Click Here to visit our website. 

Disclaimer

The above checklist is for general guidance and may vary depending on the nature of business, regulatory changes, and specific facts of each case. It does not constitute legal or professional advice, and detailed evaluation is recommended before implementation.