Gift City reinsurers flag GST & regulatory hurdles

(File photo) Gift City in Gandhinagar, Gujarat
| Photo Credit:
VIJAY SONEJI

Reinsurance entities operating from India’s International Financial Services Centre (IFSC) in Gujarat are facing both operational hurdles as well as a structural GST disadvantage, officials said during the third edition of the IFSCA-IRDAI-GIFT City Global Reinsurance Summit 2026, held in Mumbai on Monday.

Hasmukh Adhia, Chairman of Gujarat Finance International Tec-City (Gift City) Co Ltd, said the GST issue will be taken up with the Centre for possible relief. Speaking at the summit, Adhia said the problem stems from the application of the forward charge mechanism on premia paid to IFSC-based insurers, unlike similar cross-border transactions that are taxed under the reverse charge mechanism.

“I have been told by some of the reinsurance players that there is a GST issue in terms of the burden on the reinsurance entity under the forward charge,” Adhia said. “When an Indian insurance company pays premium to a cross-border insurer, the GST burden is under the reverse charge mechanism. But if the insurer is located in Gift City, the supplier has to pay GST and bear the entire compliance burden,” he added.

Calling the industry’s demand for a shift to reverse charge “a very valid point”, Adhia said such a change is administratively feasible. “If it is possible, we should move the premium paid to the insurance company to a reverse charge mechanism. Having dealt with GST in the past, I know it is easy to do. I am going to Delhi tomorrow and will speak to the Revenue Secretary to see what best can be done,” he said.

Echoing these concerns, Dipesh Shah, Executive Director at the International Financial Services Centres Authority (IFSCA), said the issue arises when IFSC entities transact with domestic India, even though their operations are otherwise offshore in nature. “When business is done from IFSC to overseas, there is no GST because it is essentially offshore to offshore,” Shah said. “But when it comes to domestic India, that is where the GST issue arises, as domestic transactions have a GST component. At present, this is under the forward charge mechanism, whereas industry players want it to be under reverse charge. That is what is being debated.” Under the GST framework, the default rule is the forward charge mechanism, where the supplier is liable to collect and remit tax. The law, however, also provides for a reverse charge mechanism for notified categories of supply, under which the recipient pays GST directly to the government.

Two-tier nod

GIC Re, India’s largest State-owned reinsurer, was the first reinsurance entity to establish operations in Gift IFSC, helping set up the framework for global reinsurance business from the hub. “Challenges are still there. About 60–80 per cent of the problems have been resolved in terms of the two-tier approval required in Gift IFSC. Whenever any approval is required, it goes to IFSCA and it takes approval from SEZ in the back-end because of certain regulatory and legal framework, which complicates matters. But it is getting sorted out,” Hitesh Joshi, Executive Director (Additional Charge of CMD), GIC Re, told businessline on the sidelines of the summit.

Ajay Seth, IRDAI Chairman who was present at the event on Monday said that Gift IFSC is well-positioned to host global reinsurance operations. “A large number of reinsurance parties have set up, or are in the process of setting up, global capability centres (GCCs) in India. Gift IFSC is uniquely placed to promote those GCCs. If underwriting work needs any regulatory accommodation or changes, we are here. If that requires policy support, we can collectively approach the government,” he said. Seth said reinsurance for emerging areas like civil aviation, shipping and shipbuilding and for MSMEs were the need of the hour.

There is already a growing roster of global reinsurers entering the Gift City ecosystem. The growing interest from global players is reflected in business volumes at the IFSC. In the second quarter of FY26, reinsurance activity at Gift IFSC recorded a four-fold jump, with gross written premium rising to $199.52 million, compared to $51.75 million in the corresponding quarter of the previous year, underscoring the rapid scaling up of cross-border reinsurance operations under the IFSCA regulatory framework. 

Under the IFSCA (Registration of Insurance Business) Regulations, 2021, approved IIOs are permitted to undertake life, general and reinsurance business, subject to regulatory conditions and capital requirements. The framework is part of the government’s broader strategy to onshore international financial activity and reduce India’s dependence on overseas reinsurance markets.

Published on January 19, 2026