Gift City IFSC: The New Hub For Indian Aircraft Leasing And Financing

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India is one of the fastest-growing aviation markets in the world, with the potential to become the third-largest aviation market by 2025. However, the country’s aviation industry has been facing challenges in terms of financing and leasing, hindering its growth. In response to this, the Ministry of Civil Aviation, Government of India constituted a Working Group on Development of Avenues for Aircraft Financing and Leasing Activities, known as ‘Project Rupee Raftar.’

Introduction
Eligibility For Aircraft Leasing In GIFT City
Process Flow For Registration Of Aircraft Leasing In GIFT City
Benefits For Aircraft Lessor Registered In GIFT City- IFSC
General Conditions
Conclusion
Why Choose InCorp?
FAQs

The project aims to develop a robust and indigenous leasing and financing structure in the country, with the involvement of various stakeholders, regulatory bodies, and financial institutions. Through the efforts of Project Rupee Raftar, the International Financial Services Centre Authority Act (IFSCA) notified aircraft leasing as a financial product, creating a significant opportunity for the establishment of a viable aircraft leasing market in India. The scope of aircraft leasing includes operating lease, finance lease, and a hybrid of both. Finance lease is considered a permitted core activity, while operating lease is regarded as a permitted non-core activity.

In this blog, we will explore how the IFSCA’s move to include aircraft leasing as a financial product has opened up new avenues for financing and leasing activities, unlocking the unbridled potential of the Indian aviation market. The blog comprises of the eligibility criteria, process for registering in GIFT IFSC, tax benefits for lessors and certain general conditions to follow:

Eligibility for Aircraft Leasing in GIFT City

Lessor can undertake permissible activities depending upon nature of lease:

Process flow for registration of Aircraft Leasing in GIFT City

Benefits for Aircraft lessor registered in GIFT City- IFSC

*Particulars*	*Benefits*
*Income Tax Act*	100% tax exemption for 10 consecutive years out of 15 years Capital gain tax deduction from transfer of an aircraft or aircraft engine previously leased by it to any person then the previously mentioned tax holiday period is also applicable to it, provided it has commenced its operations by March 31, 2024, under section 80 LA of Income Tax Act,1961. MAT / AMT @ 9% of book profits applies to Company / others setup as a unit in IFSC (MAT not applicable to companies in IFSC opting for new tax regime). Dividend paid to shareholders of company in IFSC (Taxable in the hands of recipient, Exemption not relevant due to withdrawal of DDT regime). No withholding of taxes is required on interest paid to Non-residents by units in IFSC. Withholding of taxes is not required on aircraft lease payment to non-residents by units in IFSC provided it has commenced its operations on or before March 31, 2024.
*Goods and Service Tax*	No GST on services – received by unit in IFSC provided by IFSC / SEZ units to offshore clients GST applicable on services provided to DTA
*Customs Duty*	Exemption from customs duty for all goods imported in the SEZ used for authorized operations. However, any removal of goods from SEZ into Domestic Tariff Area (“DTA”) would attract customs duty.
*Central Excise* *Duty*	Exemption from duty of excise on domestic procurement to carry out authorized operations. However, the removal of goods into DTA shall be liable to excise duty.
*Other Benefits*	100% reimbursement of stamp duty and registration paid 100 % reimbursement of electricity duty and Re. 1 subsidy on power tariff for a period of 5 years. 100% of EPF amount paid in case of female employees and 75% of EPF amount paid in case of male employees Lease rental subsidy for every 50 sq. ft per employee Up-to 20 employees – Rs 8 per sq. ft 20-100 employees – Rs 5 per sq. ft 21 Above 100 employees – Rs 3 per sq. ft

Benefits given by Gujarat Government for setting unit in GIFT City IFSC in Gujarat IT/ITeS policy (2022-27) :

General Conditions:

Lessor should undertake all transactions in freely convertible foreign currency only. Administrative expenses may be undertaken by the lessor in INR by maintaining a separate INR account.
Books of Accounts, records, document to maintained as required by applicable law in any freely convertible currency.
Lessor shall submit annual final statement within 15 days of finalization all financial information in USD unless otherwise specified.
Lessor shall comply with Cape Town Convention and Protocol and other required statutory requirement, obligation, standards, policies direction and guidelines.
In case the lessor fails to comply with the condition subject to which registration is granted, IFSCA may act after giving an opportunity of submission.

Conclusion

In conclusion, the Indian government’s initiative to develop a robust and indigenous leasing and financing structure, and the IFSCA’s decision to notify aircraft leasing as a financial product, has created a viable aircraft leasing market in India. The registration of aircraft lessors in GIFT City-IFSC offers various benefits, including tax exemptions, GST and customs duty exemptions, and other subsidies, which make it an attractive destination for aircraft leasing companies.

Why Choose InCorp?

At Incorp, we understand the importance of a robust and indigenous leasing and financing structure for the aviation industry. We recognize that setting up an aircraft leasing company can be a complex process, requiring expertise in various fields, including finance, law, and regulation. That’s why we offer specialized advisory services to assist companies in setting up aircraft leasing companies and availing the benefits of the recently created aircraft leasing market in India. Our team of experts can guide companies through the entire process, from initial planning and formation to ongoing compliance and management. With our help, companies can take advantage of the significant benefits offered by the new market, including access to affordable capital and increased flexibility in fleet management. Contact us today to learn more about how we can help your company succeed in the aircraft leasing industry in GIFT City.

FAQs

Whether sale and purchase of aircraft are included in the above framework?

No, the above framework includes activities related to aircraft leasing including operating, finance leasing, hybrid leasing, asset management support services for assets owned or lease out and sale or lease back, purchase, novation, transfer, assignment, or similar transaction related to aircraft leasing.

What are the key benefits of Aircraft leasing from IFSC?

The key benefits of Aircraft leasing from IFSC are as follows:
A. Regulatory Regime

Light touch regulation in a robust framework
Engagement with forward looking proactive and unified regulator

B. Global Opportunities

IFSC offers an ideal platform to undertake operating as well as finance leasing activities for India as well as for global markets

C. Tax Efficient Jurisdiction

IFSC offers a globally competitive tax regime
Exemption from Capital Gain Tax on disposal of aircrafts
Waiver of stamp duty

D. DTAA

Extensive Double Tax Treaty Network with more than 90 Jurisdiction

E. Vibrant Financial Growth

Concentration of financial institutions in IFSC including global bank, asset management companies, finance companies and professional service provider.
Access to global financial institution and investor

Whether lessor can setup aircraft leasing business as partnership firm in GIFT city?

Lessor is allowed to set up the operations only in the form of limited liability partnership, company, or Trust and not in form of Partnership firm.

Whether any subsidiary or associate company of parent company can set up business operation as lessor?

Only Wholly owned Subsidiary of parent company are allowed to undertake aircraft lease in GIFT city.

Need help with navigating the rules and regulations in Gift city?

Get in touch with us right away!

Gift City: The New Hub For Indian Aircraft Leasing And Financing

Table Of Contents

Eligibility for Aircraft Leasing in GIFT City

Related Read: Budget 2023: Major Boost & Benefits For GIFT City IFSC

Related Read: A Complete Overview Of IFSC Gift City And Tax Benefits

Process flow for registration of Aircraft Leasing in GIFT City