Indian and foreign corporates will be encouraged to set up large treasury operations in GIFT IFSC in Gujarat after the Budget on Saturday proposed to exempt the “deemed dividend” clause impacting Global Treasury Centres, said the International Financial Services Centres Authority (IFSCA).
The Finance Bill proposes that the provisions of deemed dividend shall not apply to treasury centres in IFSC on any advance or loan between two group entities. This will applicable if one of the group entity is a “finance company” or a “finance unit” in IFSC set up as a global or regional corporate treasury centre for undertaking treasury activities or treasury services, and the parent entity or principal entity of such group is listed on the stock exchange in a country or territory outside India (other than that as specified by the Board).
K Rajaraman, Chairperson of IFSCA, told businessline, “This step improves the viability of the treasury centres set up in GIFT City. In Singapore or Hong Kong, these kinds of deemed dividend clauses do not exist. Therefore they are more competitive. Here, the idea is to get some of the treasury centres which are India focused to come back to India.”
overhaul systems
“Our Global Treasury Centre framework is likely to be upgraded in the next fortnight. We are trying to overhaul our systems and make it attractive for Indian multinational companies to set up their treasury centres here,” Rajaraman added.
A treasury centre acts as an in-house bank in any multinational corporation. The two main objectives are centralised management of funds and use of global funds for the group. The treasury centre functions include intra-group financing, cash and liquidity management and financial advisory.
Public Sector Units like ONGC Videsh Ltd and Indian Oil Corporation have launched their respective Global Treasury Centres st GIFT City that will manage treasury operations of their international assets and also raise funds.
The first treasury centre operated by IOC is already live and has reached about ₹250 million of operations.
Similar views were expressed by Kumarmanglam Vijay, Partner, Head of Practice-Direct Tax, JSA Advocates and Solicitors regarding the “deemed dividend” clause for treasury centres.
