1. GIFT City regulations top Sebi board meet agenda

GIFT City regulations top Sebi board meet agenda

The Sebi board will meet on March 22 to finalise regulations pertaining to the Gujarat International Finance Tec-City...

By: | Mumbai | Published: March 17, 2015 12:11 AM

The Sebi board will meet on March 22 to finalise regulations pertaining to the Gujarat International Finance Tec-City (GIFT). A revision of the debt-to-equity conversion pricing formula and viability study of optionally fully convertible debentures (OFCDs) are also on agenda, said three people familiar with the matter.

Finance minister Arun Jaitley will address the board meet on Sunday. Among other things, the eligibility criteria for service providers, tax rate and legal framework for the GIFT City will be discussed. A tax rate of 0-3% has been proposed to encourage entities to establish business.

A low tax rate has been proposed to keep India’s International Financial Services Centre (IFSC) competitive with other global centres like Dubai, Malaysia and Singapore. SEZs are considered foreign territories and are entitled to pay a minimum alternate tax (MAT) of around 20%.

At present, Dubai International Financial Centre (DIFC) levies no tax on income and profits. The Malaysian counterpart levies 3% tax, while the rate in Singapore stands at 10%.

“We have recognised five key parameters: Good infrastructure, pro-active rules for hassle-free business, tax breaks or an efficient tax framework, and legal and regulatory framework. While some rules may be finalised (at the meet), others are expected soon after the March deadline (set by the Centre to issue appropriate norms),” said Ramakant Jha, MD, GIFT City.

The Sebi board will also discuss a revision in the debt-to-equity conversion pricing formula. Sebi chairman UK Sinha had in February said the current pricing formula had, at times, worked against the interests of bankers in the debt-restructuring exercise.

Under the current tules, the pricing of preferential allotment of troubled companies is calculated on the basis of the 26-week average or two-week average price of the stock with the date of CDR approval treated as the reference date.

However, the share price of a company under debt recast is often below its intrinsic value, which results in “up-front allocation of disproportionate share of loss on restructuring to banks”.

To-do list
* Eligibility criteria for service providers, tax rate and legal framework for the GIFT City may be discussed
* A revision of the debt-to-equity conversion pricing formula and viability study of optionally fully convertible debentures are also on agenda
* Finance minister Arun Jaitley will address the board meet on Sunday

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