Commodities

GIFT City boost: Bourses join hands for bullion exchange

Our Bureau Mumbai | Updated on March 01, 2021

National Stock Exchange of India, Multi Commodity Exchange, BSE subsidiary India INX International Exchange, National Securities Depository and Central Depository Services have signed a Memorandum of Understanding for setting up Market Infrastructure Institutions comprising International Bullion Exchange, Clearing Corporation and Depository at Gujarat International Finance Tec-City (GIFT).

This move is in line with the government’s objective to make India a price-setter in bullion trade through GIFT International Finance Service Centre.

This is in accordance with the International Financial Services Centres Authority (Bullion Exchange) Regulations, 2020 and other applicable Laws.

Last October, the Centre had notified a Bullion Spot contract and Bullion Depository receipt under the IFSCA Act, 2019. Though NSE, MCX and BSE had expressed interest to set up a bullion exchange separately, the newly appointed regulator the International Financial Services Centre Authority (IFSCA) insisted on allowing only consortium of exchanges for the bullion exchange rather than permitting individual and multiple exchanges.

The move will help in efficient price discovery in domestic market given the fact that India is the second largest consumer of the yellow metal, said an official from one of the bourses.

Investing in IFSC

In December, IFSCA has allowed resident Indians to use the Liberalised Remittance Scheme to invest in the IFSC.

IFSCA approved the International Financial Services Centres Authority (Banking) Regulations, 2020, last month laying down the requirements for setting up IFSC Banking Units.

Resident Indians, with a net worth of over $1 million, are now allowed to open foreign currency accounts in any freely convertible currency at IBUs to undertake any permissible current or capital account transactions under LRS.

Under the RBI’s LRS, banks can freely allow remittances by resident individuals up to $250,000 per financial year for any permitted current or capital account transaction or a combination of both. The scheme is not available to corporates, partnership firms, HUFs and trusts. The move will now pay for retail participation in Gift city for the first time since its inception in 2015.

Tax breaks

In order to attract hedge funds (category III AIFs that raise monies from non-resident investors) investment in Gift City the government had offered taxation sops bringing the regime in line with the offshore tax treaties.

The benefits include zero tax on bond trading or derivative trading and reduced tax rates on interest and dividend are now being offered by the government to Category III funds (with non resident investors) operating out of IFSC Gift City.

Moreover, Category III funds setting up offices out of IFSC ( Gift City) will not be required to file returns or obtain PAN numbers, going by the recent tax law changes made late last year.

Published on March 01, 2021

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