The starting point: an IFSC unit is an SEZ unit
For tax purposes an "International Financial Services Centre" has the meaning in section 2(q) of the Special Economic Zones Act, 2005, and a "Unit" the meaning in section 2(zc) of that Act. The indirect-tax treatment follows from that SEZ status.
Under section 16(1)(b) of the Integrated Goods and Services Tax Act, 2017, a supply of goods or services to an SEZ developer or SEZ unit for authorised operations is a zero-rated supply. Under section 16(3), the supplier may make the supply under a bond or letter of undertaking without paying integrated tax and claim a refund of unused input tax credit. Section 16(4) allows the Government to notify classes of persons or supplies that may instead pay integrated tax and claim a refund.
CBIC Circular 48/22/2018-GST explains that zero-rating and the refund depend on the supply being received for authorised operations, as endorsed by the specified officer of the Zone. Without the endorsement the supplier's refund is at risk.
Treatment by counterparty
| Supply | Position stated in official sources |
|---|---|
| Supplier in India to an IFSC unit, for authorised operations | Zero-rated; the supplier uses the LUT or bond route or the refund route (IGST Act, section 16) |
| IFSC unit to an offshore client | No GST, per GIFT City's guides |
| IFSC unit to another IFSC or SEZ unit | No GST, per GIFT City's guides |
| Transactions on IFSC exchanges | No GST, per GIFT City's guides |
| IFSC unit to a client in the domestic tariff area | GST applicable, per GIFT City's IFSC guide; needs separate analysis |
The last row is where problems arise. An IFSC unit serving Indian residents, for example a fund manager with resident investors under the Liberalised Remittance Scheme, should not assume the offshore-client position applies. Treat each revenue stream separately.
Customs and leasing
GIFT City's guides describe the following positions for aircraft and ships:
- Import of an aircraft or aircraft engine into the IFSC is not subject to basic customs duty, but the aircraft or engine must land in an SEZ for the exemption to apply. A ship or ocean vessel must be physically brought into an SEZ.
- Leasing an aircraft, engine or ship into the IFSC is not subject to integrated tax if the services are procured for authorised operations in an SEZ.
- An Indian airline importing an aircraft or engine from an IFSC lessor for scheduled operations, or an Indian shipping company importing a vessel other than for breaking up, does not pay basic customs duty.
- Leasing by an IFSC unit to an Indian airline or Indian shipping company is subject to integrated tax under forward charge, which the guides put at 5% of lease rentals.
Goods brought into the SEZ for authorised operations follow SEZ customs procedures. See aviation and shipping.
A 2026 change for intermediaries
Section 157 of the Finance Act, 2026 omitted clause (b) of section 13(8) of the IGST Act. That clause had fixed the place of supply of intermediary services at the supplier's location. With it gone, the general place-of-supply rule applies, and the service recipient's location becomes decisive. Brokers, distributors and other intermediaries in GIFT IFSC that serve foreign clients should review their GST position. Indian businesses buying intermediary services from abroad should review whether they now owe tax under reverse charge.
What to plan for
- Supplies to an IFSC unit are zero-rated. The supplier uses the refund or LUT route and needs the Zone endorsement.
- Goods brought into the SEZ for authorised operations follow SEZ customs procedures. See SEZ compliance.
- Supplies by an IFSC unit to clients in India are outside the offshore-client relief and need separate analysis.
- Check the specific CBIC notification for the service before relying on an exemption. The GIFT City guides are summaries, not law.