Accounting/Tax/Law Firms encouraged to operate from GIFT City... Global Accounting Units of foreign Companies may also get a boost

[Vivek Jalan]

GIFT City of International Financial Services Centre (IFSC) remains high on the Ministry of Finance’s radar.

Many companies abroad have opened their Global Accounting/taxation Centres in India wherein the entire Global Accounting and taxation functions are managed from India. Now such Companies can open their centres in GIFT City and try to avail the tax benefits as book-keeping services, accounting services and taxation services rendered to Non-residents (NRs) are also notified as ‘financial services’. The decision is expected to provide a boost to the Accounting Firms in India also to open their units in GIFT City.

Currently, entities are allowed to operate from GIFT City to provide banking, capital market, asset management, insurance, and aircraft leasing services, fintech, stock and commodity exchanges services, etc. Vide Notification dated 18th January 2024, the ministry has notified four more services provided by such units to non-residents (NR) as financial services, namely: -

1.book-keeping services;

2. accounting services;

3. taxation services; and

4. financial crime compliance services:

Hence, these units can avail tax benefits available to such entities.

However, the same is subject to the following limitations –

(i) It is inapplicable to those businesses which are formed by splitting up of business already in existence in India; or reconstructing of business already in existence in India; or reorganising of a business already in existence in

India:

(ii) Further such units shall not offer the services by way of transferring or receiving of existing contracts or work arrangements from their group entities in India.

Hence say an accounting Firm in Delhi receives a contract for accounting services from a NR. Now this Delhi entity outsources the work to its sister unit in IFSC, then it would not get the benefit of this notification. However, if the Unit in IFSC gets the contract afresh from an NR, then the benefit of the notification can be availed.