25 Important SEZ Compliance FAQs for GIFT IFSC Units

Every entity operating in GIFT IFSC must comply not only with the applicable IFSCA regulatory framework but also with the SEZ Act, 2005 and SEZ Rules, 2006. The SEZ requirements continue throughout the lifecycle of the unit—from obtaining the Letter of Approval and commencing operations to periodic reporting, changes in business, renewal and eventual exit. The following FAQs address some of the most practical compliance issues faced by GIFT IFSC entities.

1. Is an SEZ Letter of Approval mandatory for every GIFT IFSC unit?

Yes. The SEZ Compliance FAQ Booklet states that every entity intending to establish a unit in IFSC must obtain a Letter of Approval (LOA) under the SEZ framework. Since an IFSC can exist only within an SEZ, every IFSCA-regulated unit is also subject to SEZ compliance.

2. What does the SEZ LOA permit an IFSC unit to do?

The LOA is issued under Rule 19 of the SEZ Rules for a specific set of Authorised Operations. The unit should undertake only the services mentioned in the LOA.

3. What is BLUT and why is it important?

The Bond-cum-Legal Undertaking, or BLUT, is a key post-LOA compliance document under the SEZ framework. It records the unit’s undertaking to comply with applicable SEZ obligations and conditions and is linked to the benefits and concessions available to the SEZ unit.

4. Is a registered lease deed mandatory?

Yes. The registered lease deed is an important post-LOA requirement and is also relevant for taking commencement of operations on record. A delay in submission may also attract regulatory consequences.

5. What is the time limit for submitting the lease deed?

The FAQ booklet identifies submission of the registered lease deed after six months from issuance of the LOA as one of the common instances that may attract penal provisions.

6. What is considered commencement of operations?

In the normal course, the first invoice may be treated as evidence of commencement. However, the appropriate evidence may differ for funds or entities that do not operate through conventional invoicing. The evidence should therefore reflect the actual authorised activity undertaken by the unit.

7. How is commencement intimated?

Commencement is intimated through the “Free Form – Unit – Intimation of DCP” on the SEZ Online portal. The filing is supported by proof of commencement, applicable IFSCA approval and the registered lease deed. The commencement filing is required to be completed through SEZ Online rather than through physical or email mode.

8. Is SERF ID required before commencement filing?

No. The SEZ guide clarifies that generation of a SERF ID is not mandatory before filing the commencement intimation.

9. What happens if the LOA expires before commencement is intimated?

Where commencement intimation is submitted only after expiry of the LOA, the validity issue must first be addressed through the applicable LOA extension process.

10. Can an IFSC unit raise invoices after LOA expiry?

No. A unit should not raise invoices or receive payments against invoices while its LOA is invalid or expired. The validity should first be regularised before business is continued.

11. Is MPR mandatory for every GIFT IFSC unit?

Yes. All IFSCA-regulated IFSC units that have obtained an LOA are required to submit the Monthly Performance Report (MPR) every month through the SEZ Online portal.

12. What does MPR contain?

MPR provides a monthly snapshot of operational information such as employment and investment. Direct employment includes employees on the payroll, while outsourced, contractual and temporary personnel are treated as indirect employment. Hard assets such as interiors, furniture, IT systems and servers are treated as investment for MPR purposes.

13. What is SERF?

The Service Exports Reporting Form (SERF) is a monthly summary of invoices generated or issued by the unit. It becomes applicable once commencement has been taken on record by the Administrator (IFSCA).

14. How does a fund with no exports file SERF?

Where a fund has its own SEZ LOA but no exports of its own, it must file a NIL SERF every month. The FME reports the relevant invoice-wise transaction details in its own SERF.

15. What is APR and when is it due?

The Annual Performance Report (APR) is filed in Form-I. It must be submitted within nine months from the close of the financial year, effectively by 31 December of the subsequent financial year.

16. Who certifies the APR?

The APR must be authenticated by the authorised signatory of the unit and certified by an independent Chartered Accountant or Cost Accountant.

17. Is SOFTEX required for GIFT IFSC units?

No. The FAQ booklet specifically clarifies that IFSC units falling within the relevant definition of financial institution are not required to file the SOFTEX Declaration Form.

18. Can a GIFT IFSC unit change or add office premises?

Yes, but the prescribed SEZ Online process must be followed. Addition of premises is filed through “Free Form – Change of Area (Addition)” with the relevant Provisional Letter of Allotment.

19. Can an IFSC unit undertake a new activity not mentioned in its LOA?

No. The unit should undertake only activities covered by its LOA and supported by the relevant IFSCA licence or registration.

20. What is broadbanding of the LOA?

Broadbanding refers to the process of adding or changing Authorised Operations in the existing SEZ LOA.

21. Is separate SEZ reporting required for changes in shareholding or directors?

Under Instruction No. 122, specified organisational changes are generally handled through the applicable IFSCA regulatory process, with the Administrator obtaining the information for UAC purposes, thereby reducing duplicate reporting.

22. How long is the LOA valid after commencement?

After commencement, the LOA becomes valid for five years from the date of commencement and thereafter requires renewal every five years.

23. When should the LOA renewal application be filed?

The renewal request should be filed before two months from the date of expiry of the LOA. Delayed filing may require justification and may also attract penal consequences.

24. What is the minimum penalty for contravention of the LOA?

The booklet states that the minimum penalty under Section 11(2) of the FTDR Act is ₹10,000. A higher penalty may apply depending upon the seriousness of the offence.

25. Can a GIFT IFSC unit simply allow its LOA to expire when closing?

No. A unit that does not wish to continue operations must obtain formal exit approval under Rule 74 of the SEZ Rules. The exit process generally involves Form-L, completion of applicable MPR, SERF and APR filings, surrender of the IFSCA approval and final SEZ exit approval.

Conclusion

SEZ compliance for GIFT IFSC units continues throughout the entity’s lifecycle. LOA validity, commencement, lease documentation, periodic filings, business changes, renewal and exit should therefore be monitored together. A structured compliance calendar and periodic review can help ensure that IFSCA approvals, SEZ Authorised Operations and actual business activities remain properly aligned.