The recent report submitted by the Expert Committee on developing GIFT IFSC as a “Global Finance and Accounting Hub” marks a pivotal moment in India’s financial landscape. With a comprehensive review and strategic recommendations, the report aims to propel GIFT IFSC into a prominent global center for finance and accounting services.
International Financial Services Centres Authority
PRESS RELEASE
Report of the Expert Committee on developing GIFT IFSC as “Global Finance
and Accounting Hub” submitted to IFSCA
The Expert Committee on developing GIFT IFSC as “Global Finance and Accounting Hub” has submitted its report to Chairperson, IFSCA on Tuesday, March 26, 2024. The Expert Committee was constituted pursuant to the notification issued by Ministry of Finance on January 18, 2024 wherein book-keeping, accounting, taxation and financial crime compliance were notified as ‘financial services’ under Sec 3(1 )(e)(xiv) of IFSCA Act, 2019. The Expert Committee was chaired by the President of the Institute of Chartered Accountants of India (ICAI). The committee comprised of experts from the industry, academia and the Government.
The Expert Committee has recommended a comprehensive regulatory regime for undertaking Bookkeeping, Accounting, Taxation and Financial Crimes Compliance services from IFSC in India. Additionally, the Committee has also made several recommendations for the promotion and development of GIFT IFSC as “Global Finance and Accounting Hub” including measures for enhancing the skills and competencies of the workforce.
In its report, the Committee has highlighted the potential for GIFT IFSC to become a global hub for book-keeping, accounting, taxation and financial crime compliance services, which would create large employment opportunities for the talented workforce.
The report of the Expert Committee can be accessed on IFSCA website at https://ifsca.gov.in/ReportPublication/index/aadg9ruDI%20M=
March 27, 2024
Gandhinagar
Executive Summary
The Government of India, through a recent Gazette notification, expanded the definition of ‘financial services’ under the IFSCA Act 2019, to include four major services namely book–keeping, accounting, taxation and financial crime compliance. This key policy decision has the potential to transform GIFT IFSC as a ‘global offshore centre for book–keeping, accounting, taxation and financial crime compliance services’ and create large employment opportunities for the talented Indian workforce.
This policy reform also provides an opportunity to develop and promote GIFT IFSC as a full service global financial centre, which is capable of catering to the increased demand for such knowledge intensive services. Globally, the offshore demand for these services is primarily being driven by acute shortage of talented workforce and cost competitiveness in emerging markets.
Furthermore, the advancements in information & technology (IT) and communication have made it possible for corporates, institutions and individuals to seamlessly avail services such as accounting, book–keeping, taxation and financial crime compliance services from anywhere in the world. Considering the inherent strength of India, in terms of, strong technology driven outsourcing capabilities, large talent pool of skilled manpower in the fields of accounting, law, taxation, etc., globally competitive cost structures and high quality service delivery, GIFT IFSC has a unique opportunity to position itself as a global offshore hub for such services.
The key recommendations of the committee are as under:
1. The Committee proposes a new regulation, which provides for a comprehensive and inclusive definition for Bookkeeping, Accounting, Taxation, and Financial Crime Compliance Services.
2. The Committee has considered the Central Product Classification Version 2.1 of the UN Statistical Commission as the starting point and has suggested certain modifications to align it with extant regulations in India.
3. The Committee also suggests that these definitions should be reviewed and updated periodically to reflect the changing market dynamics and customer needs.
4. As per the notification by Government of India dated 18 January 2024, business should not be set up by splitting up, reconstruction, or reorganization of a business already in existence in India. As a primary safeguard, the Committee recommends that entities set up in IFSC to carry out Bookkeeping, Accounting, Taxation, and Financial Crime Compliance Services should only be in the form of a company or a Limited Liability Partnership. Branch of an Indian company or LLP may be permitted only if the entity is regulated by any of the three professional bodies – ICAI, ICSI or ICMAI. Any other entity established overseas may also be permitted to set–up a branch in IFSC only if it doesn’t have any presence in India.
5. Further, the Committee recommends that the IFSCA should provide clear and objective conditions/criteria for setting up business operations in GIFT IFSC to undertake the notified financial services. These criteria are designed to ensure that new businesses are not created merely by splitting up, reconstructing, or reorganizing existing businesses in India.
6. The condition should be tested at the end of the first full financial year from the date of commencement of the operations and the subsequent nine (9) financial years.
7. The Committee suggests that the IFSCA should prescribe that the unit in IFSC should have a principal officer and a compliance officer. It also suggests that they should possess certain minimum qualifications and experience.
8. The Committee recognises that certain entities might already have been authorised by the IFSCA under the Ancillary Services framework. An appropriate grandfathering of those entities under the new regulations is also suggested.
9. New companies or LLPs that intend to provide services beyond bookkeeping, accounting, taxation services and financial crime compliance services can obtain additional registrations/ authorization under other regulations/ frameworks respectively.
10. The Committee emphasizes the need for continuous training and development programs for the workforce engaged in these services in GIFT IFSC. The programs should aim to update and upgrade the skills and knowledge of the workforce in line with the international standards and best practices, as well as to equip them with the tools and techniques to handle the specific challenges and opportunities in IFSC.
11. The Committee also proposes long-term strategies for education and skill acquisition, such as developing specialized degree or diploma programs, establishing centers of excellence or research hubs, and encouraging participation and membership in professional bodies or associations.
12. The Committee outlines some of the strategies that GIFT IFSC can adopt to promote and develop itself as a bookkeeping, accounting, taxation, and financial crime compliance hub. The strategies include marketing, global partnerships, and center of excellence. The Committee also recommends that GIFT IFSC should leverage its success stories and testimonials, participate in relevant events and platforms, forge strategic partnerships with leading accounting bodies and institutions, and establish a center of excellence for these services.
