Comments received in response to the Consultation Paper on Mapping of Services Accounting Codes (SAC) and Introduction of Foreign Currency Expense Reporting for IFSC Units under SERF and MPR

The Consultation Paper titled “Mapping of Services Accounting Codes (SAC) and Introduction of Foreign Currency Expense Reporting for IFSC Units under SERF and MPR” was issued by IFSCA on April 08, 2026. The following comments/ suggestions were received in response to the

Consultation Paper:

S. No. Consultation Question No. Comments / Suggestions Detailed Rationale Other (As per Section 7 of this Supporting Consultation Paper) Information 1 Question 2: Whether there are Fire and engineering to be reported under Better we get the clarity so that we any financial services code 997147 or 997149? are aligned with industry reporting commonly provided from or and as per expectation of the within the IFSC that are not Authority adequately covered under the proposed SAC code mapping framework (refer Annexure C ).

2 Question 4: Whether the The calculation proposed is Gross SERF is basis the Invoice raised and proposed approach for premium (not actual premium received) not on the actual premium received, capturing foreign currency minus actual expenses paid in foreign however MPR is actual payment expenses in the MPR Form currency. Either both to be on actual made, So This is not the (actual (refer Section 5) is receipt and payment or on gross premium receipt - actual payment).

appropriate for estimation of and accrued expenses. net foreign currency value c reation from the IFSC.

Page 1 of 453 Question 5: Any suggestions For reinsurance company - other major - We have our business from Group on major categories or types expenses nt included are as below - entities where we do not pay of foreign currency expenses - Commission paid (or this has to be brokerage expenses but we pay (refer Annexure B) that may reported under brokerage) commission expenses. hence be relevant for inclusion for - Services provided by Group Company separate expense head to be created.

the purpose of value-creation (like IT, HR, Trainings, etc.), or any 1 estimation. generic category like other - On the common services received Miscellaneous expenses from group we reimburse the - Membership / Subscriptions expenses to Parent / Group - Travel and Conveyances Company. Separate expense head can be created for this.

4 Question 6: Any operational 1. Foreign currency payment is made to 1. As per regulation, all the premium or implementation issues that Parent Company on account of Advance received from DTA by Foreign IFSC units may foresee in received Whether this payment to be branch shall be invested in India, reporting foreign-currency considered for reporting as this is not the hence we have asked for Advance expense data under the expense, if yes under which head. The payment from the Parent Company proposed framework. advance received was not considered for to run the operational expenses. In any reporting. coming years we will have business from outside India and this Advance

2. Basis understanding the foreign will be repaid back on monthly / currency expenses to be reported on quarterly basis. payment basis, hence there will be a timing gap as per financial books and 2. Additional detailed reconciliation MPR reported is to be maintained as per books of accounts and MPR reported.

Page 2 of 455 Question 2: Whether there are Currently, the Insurance Broker reports any financial services its services under SAC 997161 – commonly provided from or Insurance brokerage and agency services, within the IFSC that are not which adequately covers the services adequately covered under the provided by the entity. Accordingly, no proposed SAC code mapping additional SAC codes appear to be framework (refer Annexure required for the existing scope of C). activities.

6 Question 5: Any suggestions At present, the Insurance Broker does on major categories or types not incur any expenses in foreign of foreign currency expenses currency. Further, the categories of (refer Annexure B) that may foreign currency expenses listed in be relevant for inclusion for Annexure B of the Consultation Paper the purpose of value-creation broadly cover the types of expenses that estimation. may potentially be incurred by the Company in the future.

7 Question 4: Whether the As per our understanding proposed Please clarify if the proposal for proposed approach for approach may not give the desired view expenses is based on paid or incurred capturing foreign currency for estimation of net foreign currency basis, as revenue is reported on expenses in the MPR Form value creation from the IFSC in the actual invoice basis and not on (refer Section 5) is current formats settlement. For example, if certain appropriate for estimation of claims are not paid but only reserves net foreign currency value are made, those may not be creation from the IFSC. considered.

8 Question 5: Any suggestions In general, major categories of foreign Reinsurance IIOs reporting formats on major categories or types currency expenditure look reasonable. and requirements may need to be of foreign currency expenses considered accordingly to the (refer Annexure B) that may Most operating expenses are incurred in specific business model.

be relevant for inclusion for INR like Payroll, Rent, Legal/ Audit and the purpose of value-creation Consultant fee etc. This portion is not estimation. considered as Forex expenditure and may create a value mismatch.

Page 3 of 459 Question 6: Any operational Due Date: SERF reporting contains the same or implementation issues that information provided in GST return IFSC units may foresee in Request SERF filing timeline extension & the due date of GST return is on reporting foreign-currency from 5 to 11 each month or provide us 11 of every month. Digitization of expense data under the the exemption from filing SERF for SERF form linked with GST portal proposed framework. Reinsurance IIO may be considered as similar details are reported at invoice level in GST Similarly, extension for MPR from 5 of outward return. Further, Similar data the months to 15th of the month because is quarterly reported to IFSCA in proposed expense reporting would need Form A and B.

closure of books and account and recondition to be completed Uniformity of data and timeline by avoidance of duplicity in reporting may be considered for IFSCA registered units.

Page 4 of 4510 Question 1: Whether the Whether Lloyd’s IFSC and Lloyd’s In the Lloyd’s IFSC model, the proposed mapping (refer Service Companies need a further SAC Service Company binds risk on

Section 4) of sector-wise SAC code adding for “Management and/or behalf of the relevant Syndicate(s) code framework appropriately Service Fees” received and Members. The revenue stream captures the nature and scope for the Syndicate is the of financial services provided insurance/reinsurance premium ; the by IFSC units. revenue stream for the Service Company could be of different forms (including management fee or service fees paid by the Syndicate) – should these be captured as separate SAC codes, or does the Authority envisage use of one of the existing codes to capture this (such as 997169 – Other services auxiliary to insurance and pensions)? In addition, under the Lloyd’s IFSC model, Lloyd’s IFSC charges a management fee to the Lloyd’s Corporation for the services

provided. We propose to use SAC code “998399 - Other professional, technical and business services n.e.c.”, which is currently only associated with the “Finance Company” sector as per Annexure C of the Consultation Paper. This would align with the SAC currently used by our branch in the DTA.

Page 5 of 4511 Question 3: Whether the Yes The recommended SAC codes are We would recommended SAC codes are operationally practical and suitable welcome clarity operationally practical and for reporting under SERF, subject to in respect of the suitable for reporting under our response to Q.1. and Q.2. above. expectations of SERF. reporting by the Service Company and/or Syndicate and Lloyd’s IFSC, in the Lloyd’s IFSC model.

Page 6 of 4512 Question 4: Whether the Yes The proposed approach for capturing We would proposed approach for foreign currency expenses in the strongly capturing foreign currency MPR encourage the expenses in the MPR Form issuance of clear (refer Section 5) is Form is appropriate for estimation of guidance/instruct appropriate for estimation of net foreign currency value creation ion in the areas net foreign currency value from the IFSC set out in 5.4 of creation from the IFSC. the Consultation We suggest adding “Reinsurance Paper (i.e. (a) Commission paid” as an Expense scope of category under Annexure B for expenses to be Insurance - Reinsurance Entities reported, (b)

(IIOs) conversion methodology, and (c) reporting principles for consistency).

We would also welcome clarity in respect of the expectations of reporting by the Service Company and/or Syndicate and Lloyd’s IFSC, in the Lloyd’s IFSC model.

Page 7 of 4513 Question 2: Whether there are To add Service Codes: 998399 (Other Capital Markets include investment Referred from any financial services professional, Technical and Business banker, however these codes that are the entire list of commonly provided from or Services n.e.c.) related to investment banking are SAC code within the IFSC that are not Code 999799 (other Services n.e.c.) missing from the list mentioned in the adequately covered under the Code 997156 (Financial Consultancy SERF Format 5.0 proposed SAC code mapping Services) framework (refer Annexure Code 997120 (investment Banking C). Services)

Code: 997151 (Services related to investment banking such as mergers & acquisition services, corporate finance & venture capital services) Code 998371 (Market research services) To SAC codes for Capital Markets 14 Question 2: Whether there are to add Code: 998224 (Other Similar This Code will help in convering any any financial services Services n.e.c.) other services that an entity might do commonly provided from or to SAC code for Ancillary Services in future with the approval of within the IFSC that are not IFSCA.

adequately covered under the proposed SAC code mapping framework (refer Annexure C).

15 Question 2: Whether there are To add code 998591 (Credit Reporting Capital Markets include Credit any financial services and Rating Services) to SAC code for Rating agencies however this code is commonly provided from or Capital Market Intermediaries missing from the list.

within the IFSC that are not adequately covered under the proposed SAC code mapping framework (refer Annexure C).

Page 8 of 4516 Question 2: Whether there are To add code 998371 (Market Research Capital Markets include Research any financial services Services) to SAC Code for Capital Entities however this code is missing commonly provided from or Market Intermediaries from the list.

within the IFSC that are not adequately covered under the proposed SAC code mapping framework (refer Annexure C).

17 Question 1: Whether the The proposed sector wise SAC code The use of existing GST SAC codes No additional proposed mapping (refer mapping is broadly appropriate and avoids the complexity of introducing comments.

Section 4) of sector-wise SAC provides a structured foundation for new codes while improving reporting code framework appropriately consistent classification of financial consistency. captures the nature and scope services revenue by IFSC units.

of financial services provided Mapping by sector with indicative by IFSC units. The framework sensibly aligns with codes addresses the inconsistencies existing GST SAC codes and covers the noted in para 2.3 of the Consultation major IFSC sectors including Banking, Paper.

Capital Markets, Fund Management, Insurance, Finance Company, Fintech, and Metals & Commodities.

Page 9 of 4518 Question 2: Whether there are It is observed that Payment Service Annexure B of the Consultation Reference: any financial services Providers (PSPs) are not covered under Paper already recognises PSPs as Annexure B lists commonly provided from or the proposed SAC code mapping in distinct categories under the PSP and PSO as within the IFSC that are not Annexure C, despite being a recognised “Payment Services” sector for separate adequately covered under the category of IFSC units. expense reporting purposes. categories under proposed SAC code mapping However, the corresponding “Payment framework (refer Annexure PSPs typically earn revenue from revenue-side SAC classification in Services” sector C). transaction processing fees, payment Annexure C does not include a with identified gateway charges, cross-border remittance “Payment Services” sector. expense types.

and settlement fees, FX conversion margins, and subscription or platform This asymmetry means that while Reference: access fees charged to merchants or PSP expenses will be captured under Section 2.3 of financial institutions. the proposed MPR framework, their the Consultation revenue classification will remain Paper identifies These revenue streams do not neatly fall inconsistent; undermining the very inconsistent SAC under any single sector currently mapped objective of standardisation stated in code usage as a in Annexure C. We suggest the following para 1.5(a) of the Consultation Paper. key issue.

SAC codes be explicitly mapped for

PSPs: Without explicit guidance, different The IFSCA 997158 – Financial transactions PSP units may classify similar (Payment processing and clearing house services transaction processing revenue under Services) (for transaction processing and different SAC codes (e.g., some Regulations, settlement fees); under 997158, others under 997119 2024 define the 997119 – Other financial services (for or 998313), perpetuating the scope of PSP FX conversion margins and inconsistency problem identified in activities, which miscellaneous fee-based income); para 2.3. can serve as a 997159 – Other services auxiliary to basis for SAC financial services (for platform access The payment services sector within mapping.

fees and ancillary charges); IFSC is growing, and providing clear 998315 – Hosting and IT infrastructure SAC mapping now will avoid provisioning services (where PSPs reclassification issues later. provide technology platform services).

Page 10 of 45We recommend that a separate “Payment Services” sector be added to Annexure C w ith these mappings.

19 Question 3: Whether the The recommended SAC codes are Para 4.3(a) states that classification Suggest IFSCA recommended SAC codes are generally operationally practical for should be based on the nature of consider operationally practical and SERF reporting. However, clear service provided, not the entity type. publishing a suitable for reporting under guidance notes or a decision tree would However, Annexure C is organised guidance note SERF. help units select the correct code when a by sector (entity type), which may alongside the service could potentially fall under cause confusion. final framework, multiple SAC codes. with worked A supplementary decision tree or examples for For instance, a fintech entity providing FAQ document would improve common IT-based financial services could classify operational adoption. scenarios.

revenue under either 997119 (financial services) or 998313 (IT consulting and The choice of conversion rate can Suggest adopting support). Guidance on the primary materially affect reported expense the RBI classification principle whether the figures, especially for units with reference rate on nature of the service or the nature of the significant EUR, GBP, or other non- the last business entity should take precedence would be USD expenses. day of the helpful. month, or the A standardised conversion monthly average, methodology is essential for the as the standard FCVC metric to be comparable conversion basis.

across units and over time.

This aligns with common accounting practices and would be simple to implement.

Page 11 of 4520 Question 4: Whether the The proposal to capture aggregate · Intra IFSC flow netting: Intra - proposed approach for monthly foreign-currency expenses in IFSC flows must be netted at system capturing foreign currency MPR, and to derive FCVC = FCGR – level. If IFSC Unit A pays USD 1m expenses in the MPR Form FCEXP, is conceptually sound and will to IFSC Unit B for shared services, (refer Section 5) is materially improve IFSCA’s ability to both A’s FCEXP and B’s FCGR will appropriate for estimation of assess net foreign-currency value increase by USD 1m producing zero net foreign currency value creation at sectoral and system-wide net change in true value-creation, creation from the IFSC. levels. The proposal is supported in but, without netting logic, polluting principle. both unit-level and aggregate FCVC.

The new SERF service-flow tags However, certain methodological (“Exports to Other IFSC / SEZ refinements are necessary for the formula Units”) provide a built-in mechanism

to deliver the intended analytical value: to identify these flows; IFSCA should formally use them for FCVC · Intra IFSC flow netting: FCY aggregation. expenses paid by one IFSC unit to · Exclusion of INR expenses settled

another are simultaneously revenue for via SNRR: The SNRR routed INR the recipient unit. At system level, this expense base is economically funded creates double counting unless intra- by inward remittance of foreign IFSC flows are netted using the new currency. Conceptually, when an SERF destination tags (Section 2.5) IFSC unit converts USD revenue into INR (via SNRR) to pay rent, salaries · Exclusion of INR expenses settled and other domestic costs, the foreign

via SNRR: The proposal captures only currency has left the unit’s books in foreign-currency expenses, whereas a real economic terms even though the substantial portion of an IFSC unit’s final settlement to the vendor is in economic cost base including office rent INR. Treating SNRR-routed INR at GIFT City, salaries and wages to expenses as outside FCEXP scope Indian employees, statutory contributions therefore creates a structural (PF / ESI / Gratuity / Professional Tax), overstatement of FCVC, particularly local professional fees, utilities and other acute for people-intensive sectors domestic services is settled in Indian where salaries can constitute 40– Page 12 of 45Rupees through the unit’s Special Non- 60% of total costs.

Resident Rupee (SNRR) account, funded · Conversion methodology for non-

by inward remittance of foreign USD foreign currencies: On the currency. These INR outflows are conversion methodology for non- economically funded out of foreign- USD currencies, three commonly currency revenue and represent a genuine used conventions exist, each with reduction in net foreign currency value trade-offs: transaction date rates are created by the IFSC unit. Excluding them most accurate but operationally from FCEXP will systematically heavy; month-end rates are simplest overstate FCVC at both unit and system but ignore intra-month volatility;

level, particularly for service-intensive monthly weighted-average rates and people-intensive sectors (Payment balance accuracy and operational Services, FMEs, Ancillary Services, ease. A single mandated convention GAO, GIC, TechFin) where the INR- across the IFSC with FBIL / RBI denominated local cost share is high. reference rate is materially preferable to leaving the choice to individual · Conversion methodology for non - reporting units.

USD foreign currencies: Section 5.3 prescribes conversion of foreign currency expenses into USD but does not specify the conversion approach for expenses denominated in currencies other than USD (e.g., EUR, GBP, SGD, AED, JPY, CHF). Clarity is needed on whether IFSC units should apply (i) the transaction-date exchange rate, (ii) the month-end closing rate, or (iii) a monthly weighted-average rate, when translating non-USD FCY expenses into USD. Each method produces materially different aggregate USD figures during periods of currency volatility, and inconsistent application Page 13 of 45across units will compromise comparability the very objective the proposal seeks to achieve.

21 Question 5: Any suggestions The indicative list in Annexure B is These expense categories are - on major categories or types comprehensive. common across IFSC units and are of foreign currency expenses typically denominated in foreign (refer Annexure B) that may currencies.

be relevant for inclusion for the purpose of value-creation estimation.

Page 14 of 4522 Question 6: Any operational The following operational and These are practical issues that could Suggest IFSCA

or implementation issues that implementation issues may arise: affect data quality in the initial consider:

IFSC units may foresee in (a) Timeline for implementation: Units months of implementation if not reporting foreign-currency will need time to configure their addressed upfront. - A 3-month expense data under the accounting systems to extract and parallel reporting proposed framework. aggregate foreign currency expenses A transition period with IFSCA period where monthly. A phased implementation or a helpdesk support would improve expense data is 2-3 month dry-run period would be compliance and data quality. submitted on a helpful. best-efforts

(b) Multi-currency reporting: Units basis; operating in multiple foreign currencies (EUR, GBP, SGD, AED, etc.) need - A detailed FAQ clarity on whether to report expenses document currency-wise or only the aggregate addressing edge USD-converted total. cases;

(c) Intercompany transactions: Guidance is needed on whether to include or - A validation exclude intra-group foreign currency mechanism on payments (e.g., head office SLA charges) SEZ Online to to avoid double counting at the system flag outlier level. values for unit

(d) Retrospective reporting: Clarity on review. whether the new expense field will apply prospectively or if historical data will - Phased also need to be restated. applicability: voluntary reporting in the first quarter post-

notification, mandatory thereafter.

Page 15 of 4523 Question 2: Whether there are Under Insurance heading, there is a Health insurance is offered by Life any financial services separate heading for Accident and Health Insurance entities, General Insurance commonly provided from or Insurance Services (997133). Entities and standalone Health within the IFSC that are not Insurance Entities. Accordingly, we adequately covered under the We understand that accident and health understand that the insurance proposed SAC code mapping insurance offered by Life Insurance products offered by Life insurance framework (refer Annexure entities would be reported under heading entities will be reported under ‘Life C). ‘Life insurance services (excluding insurance services (excluding reinsurance services)’ (997132) and that reinsurance services)’ (997132).

the heading ‘accident and health insurance’ (997133) include only standalone health insurance products related services 24 Question 4: Whether the We suggest that expenses reporting shall We submit that inclusion of expenses proposed approach for be included and aligned to the SERF reporting in SERF report would capturing foreign currency reporting in lieu of MPR. enable a holistic view of the receipts expenses in the MPR Form and payments of the services offered (refer Section 5) is through the IFSC office. Aligning appropriate for estimation of expense report to SERF report will net foreign currency value enable transactions overview in creation from the IFSC. foreign currency as well as INR.

Page 16 of 4525 Question 5: Any suggestions We suggest removing the line item We refer to the IFSCA (Management on major categories or types ‘brokerage paid’ under the Insurance Control, Administrative Control and of foreign currency expenses Entities (IIOs) section in Annexure B Market Conduct of insurance (refer Annexure B) that may business) Regulations, 2023 which be relevant for inclusion for provides for definition of the purpose of value-creation ‘commission’ as any benefit payable estimation. to an insurance agent, intermediary or insurance intermediary in consideration of availing their services in relation to solicitation, procurement, retention or conversion of insurance policies’. We further submit that, considering brokers are identified as Insurance Intermediary, brokerage paid will be included in commissions paid. We accordingly suggest removal of ‘brokerage paid’ and retain commissions paid to address any potential ambiguity in reporting.

26 Question 5: Any suggestions We seek clarity on the ‘claims paid’ Life Insurance Claim may be in the on major categories or types section in the Insurance Entities (IIOs) nature of Death or Non-Death of foreign currency expenses section, under Annexure B (maturity; surrender, survival, (refer Annexure B) that may foreclosure, health, Rider, etc.). We be relevant for inclusion for accordingly seek the Authority’s the purpose of value-creation guidance on reporting such claims estimation. under the head ‘claims paid’ Page 17 of 4527 Question 5: Any suggestions We suggest addition of the below We submit that the IIO may incur on major categories or types category ‘Any other expenses incurred’ other expenses such as rent, of foreign currency expenses under the Insurance Entities (IIOs) marketing, technology etc. which (refer Annexure B) that may section under Annexure B. constitute as significant expenses.

be relevant for inclusion for Inclusion of head ‘Any other the purpose of value-creation expenses incurred’ will enable estimation. reporting of expenses not covered in the other categories provided in the Insurance Entities (IIOs) section under Annexure B.

28 Question 2: Whether there are Confirmation required as to under which Where reporting needs to be done for any financial services SAC code, profit/loss on sale of profit/loss resulting from sale of commonly provided from or securities to be reported for which no security (Investment) within the IFSC that are not invoicing is being done adequately covered under the proposed SAC code mapping framework (refer Annexure C).

29 Question 5: Any suggestions Can administrative expenses paid in INR since this is major portion of OPEX on major categories or types through SNRR account be included? for IBU's of foreign currency expenses (refer Annexure B) that may be relevant for inclusion for the purpose of value-creation estimation.

Page 18 of 4530 Question 1: Whether the It is recommended that the Insurance These recommendations are in line Nil proposed mapping (refer section of Annexure C – Indicative List with the SAC descriptions provided

Section 4) of sector-wise SAC of SAC Codes for IFSC Units be updated in the HSN Directory (Excel format) code framework appropriately as follows to align with the GST SAC available on the GST website captures the nature and scope Master, ensuring consistency in

of financial services provided interpretation and reporting: by IFSC units. a. SAC 997145 may be described as “Freight reinsurance services” instead of the generic description “Services.” b. SAC 997146 may be described as “Other property reinsurance services” instead of “Freight reinsurance services.” Page 19 of 4531 Question 3: Whether the If SERF reporting is required to be recommended SAC codes are aligned with Forms IIO-A, IIO-B and operationally practical and IIO-C, which are prepared on an accrual suitable for reporting under basis (including provisions), such SERF. invoice-level details may not be available at the time of reporting.

The existing GST mechanism has posed challenges for International Insurance Offices (IIOs), and there are indications that proposals may be made to shift GST to a reverse charge mechanism (RCM).

Under an RCM framework, certain invoice details required for SERF reporting (e.g. SAC codes, invoice dates and numbers) may not be readily available to IIOs, as the relevant tax invoices would be issued by domestic insurers under RCM.

32 Question 4: Whether the Please advise whether the foreign proposed approach for currency expenses reported in the MPR capturing foreign currency are expected to be aligned with Forms expenses in the MPR Form IIO-A, IIO-B and IIO-C submitted on a (refer Section 5) is quarterly basis, which are prepared on an appropriate for estimation of accrual basis and include provisions / net foreign currency value estimated amounts.

creation from the IFSC.

Page 20 of 4533 Question 6: Any operational The following operational and or implementation issues that implementation issues are highlighted for IFSC units may foresee in the Authority’s consideration:

reporting foreign-currency expense data under the a) The current reporting timeline of proposed framework. MPR and SERF requires submission within five days after month-end, regardless of public holidays or weekends. This is operationally challenging, as the month end closing is typically not completed and we cannot provide the foreign-currency expense data at this timeframe.

b) FCGR (Gross Revenues in Foreign Currencies) reported in SERF and FCEXP (Expenses in Foreign Currencies) reported in MPR may differ from Forms IIO-A, IIO-B and IIO-C, as only preliminary estimates of gross revenues and expenses are available at the current timeline.

c) The proposed requirement is expected to result in additional compliance burden for IIOs, particularly in a scenario where GST is shifted to RCM, which are otherwise envisaged to operate under a light-touch regulatory and compliance framework.

Page 21 of 4534 Question 1: Whether the Yes, as per our current income streams New SERF Template gives With the intent proposed mapping (refer the SAC are appropriately defined. additional invoice types alongside of reporting

Section 4) of sector-wise SAC However, the invoice type category looks previous types such as: revenue, based code framework appropriately a bit conflicting in SERF Version 5.0. not only on the captures the nature and scope - Software Exports (Offsite) nature of services of financial services provided - Software Exports (Onsite) but also on the by IFSC units. - Royalty from Software destination of - Service Exports Other than IT & IT such services, enabled Services only new export - IFSC Service Exports Outside India type category - Service Exports to Other IFSC / suffices the SEZ Units purpose i.e., - Service Exports by IFSC / SEZ Units to DTA Units - IFSC Service Exports Outside In our understanding having only the India new invoice types are good enough - Service Exports for categorisation of invoice and if to Other IFSC / we keep all of the above, the invoice SEZ Units types may be inconsistently be - Service Exports followed by different companies in by IFSC / SEZ same sector. For eg. if we have to Units to DTA report the Royalty from software Units from outside India, we may choose to report it in type " Royalty from Software" or "IFSC Service Exports Outside India". Both may deem fit.

Page 22 of 4535 Question 2: Whether there are No,as per our current revenue from Periodic review any financial services operations streams the SAC are mechanism is commonly provided from or appropriately defined. Subject to our recommended, to within the IFSC that are not understanding, other income like capture the new adequately covered under the Interest on Fixed deposits (Client and SAC requirement proposed SAC code mapping Proprietor funds), Interest on IT from time to time framework (refer Annexure refund and employee recovery etc. are for any new line C). not required to be reported here. of business.

Page 23 of 4536 Question 3: Whether the Yes, list is aligned with GST SAC List. As per last understanding in our Invoice level recommended SAC codes are But Invoice-level reporting at SAC and meeting with working committee, we reporting operationally practical and export type level increases compliance aligned that SERF and MPR would requirement suitable for reporting under burden. be SAC level consolidated reporting. mentioned in SERF. Hence, invoice level reporting is not Section 1.5 of

1. For ease of reporting in its spirit to required. IFSCA capture destination based revenue, we "Extract of guidance note discussed Consultation recommend "SAC Level reporting on in meeting held on ......... Paper.

consolidated level" instead of "Invoice 15. Reporting on the basis of B2C Also, the new and SAC level reporting currently cases and not invoice level data due format as per proposed. to high volume annexure - ,

2. The proposed format should recommends the support negative SAC level reporting Invoice-level reporting is not invoice level towards Credit note adjustement. expected to be done. So, this B2C SAC level

3. The currency conversion guidelines question does not arise." reporting shall be clearly laid out. We recommend to allow the reporting entity to report revenue in their dominant reporting currency, which will be USD for most of the entities. The portal shall itself convert the reporting currency to USD based on the rate decided by the working committee automatically.

4. We understand that only taxable value/base invoice value is to be reported here.

5. We understand that only billed revenue has to be reported. Hence payment or accrual basis reporting should not be followed.

Page 24 of 4537 Question 4: Whether the Capturing FC expenses will enable Clear definitions proposed approach for computation of net value creation and and exclusions capturing foreign currency improve policy analysis. "Extract of guidance note discussed needed.

expenses in the MPR Form in meeting held on ......... (refer Section 5) is appropriate for estimation of MPR Reporting should exclude net foreign currency value general and administrative expenses creation from the IFSC. such as the following.

i. Procurement of Manpower/Contractual employees ii. Renting of vehicles/cabs iii. Telecom expenses iv. Travel expenses v. Stationery items, office equipments vi. Food and beverages vii. Rent payment for the premises viii. Event management expenses We recommend excluding staff welfare as an additional category.

38 Question 5: Any suggestions We recommend including Marketing and Expansion of on major categories or types Business promotion as a separate Annexure-B of foreign currency expenses expense category. maybe (refer Annexure B) that may considered be relevant for inclusion for accordingly the purpose of value-creation estimation.

Page 25 of 4539 Question 6: Any operational The current consultation paper is or implementation issues that silent/ambiguous on following aspects :

IFSC units may foresee in 1.Invoice level or SAC level reporting. reporting foreign-currency We recommend the SAC level reporting expense data under the similar to what has been suggested for proposed framework. Revenue in SERF.

2. The currency conversion guidelines shall be clearly laid out. We recommend to allow the reporting entity to report expenses in their dominant reporting currency, which will be USD for most of the entities. The portal shall itself convert the reporting currency to USD based on the rate decided by the working committee automatically.

3. The expenses paid in INR to vendors which are part of indicative list of expenses as per consultation paper, shall be reported? Our recommendation is to include those in reporting.

4. The purchase of capital items like laptop, office equipment, leasehold improvement, intangible asset, trademark etc is not covered. Our recommendation is to include those in reporting.

5. The proposed format should support negative SAC level reporting for towards Credit note adjustment.

6. We understand that only taxable value/base invoice value is to be reported here.

7. We understand that only billed Page 26 of 45expenses has to be reported. Hence payment or accrual basis reporting should not be followed.

Page 27 of 4540 Question 4: Whether the MPR is not the appropriate form to • AIFs presently file an effectively proposed approach for gather the required data. Instead IFSCA NIL MPR since they are not capturing foreign currency can look to get the same information employing any capital intensive expenses in the MPR Form from IBUs. machinery nor are they having any (refer Section 5) is employees. Additional data points in appropriate for estimation of the same report shall result in net foreign currency value additional compliance burden for the creation from the IFSC. AIFs • The AIFs had previously made representations and were successful in having the NFE requirements removed via the insertion of section 53A of the SEZ Act 2005. Collecting this information will undo the relaxation provided to AIFs and are not a true or accurate reflection of AIF activities.

• Almost all expenses for AIFs barring a few paid to DTA vendors in India are in Foreign Currency.

This dataset is already being

provided to IFSCA on a quarterly basis. An additional data point here would increase compliance burden on AIFs • IBUs are already reporting this information to the RBI using the RBI/IFSCA Purpose codes. The supply of the same information to IFSCA should therefore not tantamount to any additional compliance burden on them.

Page 28 of 45• Formula provided for calculating net foreign-currency value creation

(FCVC) is essentially the same as NFE. For AIFs this will undo the amendment to Section 53A of the SEZ Act, 2005 – which provided a relaxation on this condition to AIFs as AIFs incur expenses, but their income is from Capital Gains or Other Sources. AIFs thus will always show a net negative FCVC.

41 Question 5: Any suggestions An additional Expense Field called • The expense heads provided cover on major categories or types Membership & Subscriptions may be all heads of expenses save for the of foreign currency expenses added for FMEs and AIFs following o Membership or (refer Annexure B) that may Subscription fees (other than for be relevant for inclusion for software licensing). o Fees paid to the purpose of value-creation Investment Manager estimation. • While Expenses incurred on Third Party Services Providers is generally vast and covers almost all expense heads, the amounts paid towards memberships and/or subscriptions are not necessarily for services rendered and hence can and should be classified in their own individual group.

• Similarly, Fees paid to the Investment Manager comprise of a substantial cost for an AIF and thus are better represented separately Page 29 of 4542 Question 6: Any operational Notwithstanding the point above (S No • Compilation of the total payments or implementation issues that 1) if MPR is the designated form for for FME and all AIFs managed by it IFSC units may foresee in supply of this information, given that the will be a time-consuming task which reporting foreign-currency due date for submission of the form is the will include ensuring that the books expense data under the 5th of the subsequent month, we request of accounts for the month are closed proposed framework. that the same be extended to at least the in a timely manner.

15th of the subsequent month for IFSCA • At times due to the operation of units banking holidays sometimes it may not be possible to fetch and collate the required information within the stipulated time especially given that not all banks have online banking platforms and monthly statements have to be called for manually.

Page 30 of 4543 Question 6: Any operational Scope of expenses to be reported – cash Clear guidance is required to avoid Reference is or implementation issues that outflows vs. all foreign currency inconsistent interpretations of drawn to IFSC units may foresee in expenses Clarify whether “expenses paid “expenses paid in foreign currencies” Annexure reporting foreign-currency in foreign currencies, converted into across IFSC units and to ensure that B for Finance expense data under the USD” should be reported on an accrual the FCEXP metric accurately reflects Companies in the proposed framework. basis (all expenses denominated in the intended measure (cash-based Consultation foreign currency as per books) or only on foreign currency flows vs. accrual- Paper which a cashoutflow basis (actual payments based foreign currency costs). illustrates aircraft made in foreign currency during the Non-cash items such as amortization and ship month). Also clarify the treatment of do not involve a foreign currency leasing assets non-cash / accounting items such as outflow in the reporting period and and related amortization of capital expenditure (e.g., including them could distort the amortization, aircraft or ship leasing assets) and calculation of net foreign currency necessitating whether these should be included in value creation (FCVC), especially explicit guidance FCEXP or excluded as they do not for capital-intensive sectors such as on whether involve foreign currency cash outflows aircraft and ship leasing where these charges are in the reporting month. amortization amounts may be to be captured significant relative to cash within FCEXP or movements. not.

Page 31 of 4544 Question 5: Any suggestions Treatment of penalties, fines, late fees Penal charges are generally The Consultation on major categories or types and other penal charges Provide explicit non-recurring or non-core in Paper indicates of foreign currency expenses guidance on whether amounts of a penal nature and may not reflect the that the (refer Annexure B) that may nature (penalties, fines, late fees, default underlying service-related foreign framework aims be relevant for inclusion for charges, etc.) incurred in foreign currency consumption that the to the purpose of value-creation currency are required to be reported FCEXP metric is intended to measure net estimation. under FCEXP in the MPR. Clarify capture for FCVC analysis. foreign currency whether such penal expenses should be Inconsistent treatment of such value from included for the purpose of computing items by different entities (some services, which net foreign currency value creation or including, some excluding) would warrants clarity excluded to ensure consistency and better undermine comparability and may on whether penal reflect core business-related foreign distort assessments of operational charges align currency expenses across IFSC units. efficiency and value creation in with this foreign currency terms across the objective IFSC ecosystem. or should be separately disclosed/exclud ed for analytical integrity Page 32 of 4545 Question 6: Any operational Alignment between foreign currency A divergence between accrual-based The current or implementation issues that expense reporting and existing MPR MPR procurement data and practice of IFSC units may foresee in procurement reporting Clarify whether cash-based FCEXP reporting could reporting reporting foreign-currency FCEXP reporting is intended to follow create confusion and impair the procurements in expense data under the the same basis (accrual vs. cash) as the interpretability of trends if not MPR on an proposed framework. existing Monthly Performance Report accompanied by clear guidance and incurred basis is

(MPR) procurement reporting, which reconciliation norms. Regulators and already currently records procurements on an analysts may otherwise misinterpret established; incurred (accrual) basis irrespective of differences arising purely from introducing a cash outflow timing. If FCEXP is accounting basis rather than distinct intended to be on a different basis (e.g., underlying business performance or cash-basis strictly cash-paid foreign currency foreign currency exposure, which is FCEXP field expenses), specify whether any contrary to the objective of obtaining without reconciliation requirements, explanatory reliable, comparable metrics across standardized disclosures or standard guidance will be IFSC entities. reconciliation prescribed to bridge the difference could necessitate between the two datasets for regulatory additional and analytical use. explanations by entities and may complicate regulatory analysis unless harmonized or clearly differentiated in the instructions.

Page 33 of 4546 Question 5: Any suggestions Reporting of advances paid in foreign In sectors involving large Annexure B for on major categories or types currency Clarify whether advances paid capital-intensive assets such as Finance of foreign currency expenses in foreign currency towards procurement aircraft and ships, the timing and Companies refers (refer Annexure B) that may of ships, aircraft and related equipment classification (capital vs. revenue) of to aircraft and be relevant for inclusion for (including for aircraft and ship leasing foreign currency outflows can ship leasing the purpose of value-creation entities) should be reported in FCEXP in significantly affect reported FCEXP activities, estimation. the month of remittance, even when and, therefore, the computed FCVC underscoring the these are capital advances recorded as (FCVC = FCGR – FCEXP). Without need for clear assets/advances in the balance sheet and standardized guidance, entities may instructions on not immediately expensed in the profit adopt differing approaches (e.g., whether foreign and loss account. Alternatively, confirm including capital advances vs. currency if FCEXP should capture only those excluding them), which would advances for amounts that are recognized as expenses compromise comparability and may such assets in the profit and loss account, with misrepresent actual foreign currency are to be treated capital advances for asset acquisition value creation over time, particularly as FCEXP or excluded from FCEXP reporting. during asset build-up or expansion kept outside the phases. FCEXP computation until recognized as expenses in the profit and loss account.

Page 34 of 4547 Question 6: Any operational "Foreign currency conversion The FCEXP metric and the resultant The Consultation or implementation issues that methodology for MPR reporting Provide FCVC (FCVC = FCGR – FCEXP) Paper proposes IFSC units may foresee in detailed, standardized guidance on the are sensitive to the choice of foreign FCEXP to be reporting foreign-currency methodology for converting expenses exchange conversion methodology, reported in USD expense data under the incurred in multiple foreign currencies especially when entities have but proposed framework. into USD for purposes of the FCEXP significant multi-currency exposures. does not specify field in the MPR. Specifically, clarify Inconsistent practices (e.g., some a uniform whether entities should use entities using daily transaction rates, conversion transaction-date exchange rates, others using month-end or average methodology, month-end closing rates, monthly rates) can lead to non-comparable making average rates, or a specified figures and may introduce volatility standardized reference/benchmark rate (e.g., RBI or bias unrelated to underlying guidance critical reference rate or any other designated economic activity, undermining the for rate). Indicate whether all IFSC entities objective of reliable measurement of accurate are required to adopt a uniform foreign currency value creation aggregation and conversion method consistently for within IFSC. A clearly prescribed or cross-sectional/te FCEXP reporting and, if flexibility is at least clearly disclosed and mporal analysis allowed, whether entities must disclose consistently applied conversion across the IFSC or pre-notify the conversion framework will significantly enhance ecosystem.

methodology adopted to ensure the analytical usefulness and comparability of data across IFSC units integrity of the reported data for both and over time." the Authority and market participants.

Page 35 of 4548 Question 6: Any operational Treatment of reimbursement / In practice, due to operational or The Consultation or implementation issues that cross-entity payments Clarify the temporary liquidity reasons, Paper’s focus on IFSC units may foresee in treatment of reimbursement scenarios expenses relating to a Fund or other accurate and reporting foreign-currency where one IFSC entity incurs foreign IFSC unit may be settled by an comparable expense data under the currency expenses on behalf of another associated FM or another group computation of proposed framework. IFSC entity (for example, where an FM / entity, particularly where the Fund FCEXP and investment manager or related group faces short-term fund shortages. FCVC for entity pays expenses due to temporary Without clear guidance on whether different fund shortages at the level of the Fund). FCEXP should be recognised based categories of Specifically, guidance is requested on (i) on (a) the entity bearing the IFSC entities in whose MPR such expenses should be economic cost (beneficiary) or (b) warrants explicit reported under FCEXP – the entity that the entity executing the payment instructions on makes the payment (payor) or the entity (payor), different IFSC units may reimbursement / on whose behalf the expense is incurred adopt divergent approaches, leading pass-through

(beneficiary); and (ii) how subsequent to inconsistencies, potential double arrangements, reimbursements between entities should counting (once at payor, once at especially for be reflected, if at all, in FCEXP reporting beneficiary) or under-reporting of Funds and FME to avoid double counting or omission. foreign currency expenses in the structures where aggregate IFSC data.[i] This would, inter-entity in turn, affect the reliability of FCVC settlement of (FCGR – FCEXP) as a measure of expenses is net foreign currency value creation common. Clear across the ecosystem. rules on (a) which entity should report FCEXP in such cases, and (b) whether and how intra-group reimbursements are to be excluded from Page 36 of 45FCEXP, will support consistent reporting and avoid distortion of foreign currency value creation metrics.

49 Question 1: Whether the Yes, the proposed mapping appropriately proposed mapping (refer captures the nature and scope of financial

Section 4) of sector-wise SAC services provided by IBU. code framework appropriately captures the nature and scope of financial services provided by IFSC units.

50 Question 2: Whether there are Revenues (non-interest) earned by IBUs any financial services from investment or trading activities may commonly provided from or be included separately. within the IFSC that are not adequately covered under the proposed SAC code mapping framework (refer Annexure C).

51 Question 3: Whether the Yes, subject to availability of SAC codes recommended SAC codes are wise MIS which may take some time to operationally practical and customise/ implement by reporting suitable for reporting under entity.

SERF.

Page 37 of 4552 Question 4: Whether the As per para 5.3, It is proposed that the proposed approach for Monthly Performance Report (MPR) capturing foreign currency format be updated to include “Expenses expenses in the MPR Form (paid in foreign currencies, converted (refer Section 5) is into USD)” appropriate for estimation of Here, it is appropriate if requirement is to net foreign currency value capture net foreign currency value creation from the IFSC. creation. However, it will not reflect the net profit of the entity as one of the expenses (administrative and staff expenses) are in INR and the same is recorded in equivalent USD in the books of IBU.

53 Question 5: Any suggestions Similar to our response for question no. 2 on major categories or types in reference to revenue, losses (non- of foreign currency expenses interest expenses) made by IBUs from (refer Annexure B) that may investment or trading activities may be be relevant for inclusion for prescribed separately. However, in the purpose of value-creation absence of separate category, it may be estimation. included under “Any other forex charges incurred”.

54 Question 6: Any operational We do not find any challenges in or implementation issues that reporting gross foreign currency IFSC units may foresee in expenses data in MPR. reporting foreign-currency expense data under the proposed framework.

Page 38 of 4555 General/ SERF/ Portal related. The exchange rate applied by the SEZ We would like to suggest that the portal for SERF filing may differ from SEZ portal allows IFSCA Regulated the exchange rate used in the Financial Entity to input the applicable Statements. exchange rate while filing SERF returns.

As a result there may difference between SERF export turnover and book turnover.

56 Question 4: Whether the Suitable provisions be included to define Interest income and other investment NA proposed approach for the scope of term 'Gross Revenue' in the related income may form an essential capturing foreign currency context of Life insurance in IFSC, along element of financial services revenue expenses in the MPR Form with the various aspects it may include, in the life insurance context. Since (refer Section 5) is such as interest income on investments, the proposed value creation appropriate for estimation of interest on policy loans, interests on tax computation contemplates netting net foreign currency value refunds, etc. gross foreign currency revenue creation from the IFSC. against foreign currency expenses, a uniform definition of Gross Revenue would help to ensure consistency in submissions among life insurance entities.

57 Question 5: Any suggestions The indicative list of foreign currency Insurance entities may have certain NA on major categories or types expenses for insurance entities is noted. valuation linked accounting items of foreign currency expenses In addition to the expenses listed in that may not be in the nature of (refer Annexure B) that may Annexure B, further guidance be routine expenses but may impact the be relevant for inclusion for provided on the treatment of certain life financial position or reported results.

the purpose of value-creation insurance specific items, such as change Guidance on treatment of such items estimation. in valuation of liabilities, diminution in shall help in ascertaining the the value of investments, or any other MPR foreign currency expense adjustment specific to life insurance reporting.

business, wherever relevant.

Page 39 of 4558 Question 6: Any operational Clarity be provided as to whether the A clear basis of reporting is essential NA or implementation issues that foreign currency expense reporting under for accurate and reconcilable IFSC units may foresee in MPR is to be arrived on a paid-basis or submissions. If the reporting is on reporting foreign-currency an accrual-basis? paid-basis, it may be more directly expense data under the aligned with the actual cash outflow proposed framework. The books of accounts are generally in foreign currency. However, if the maintained on an accrual-basis, whereas reporting is expected to reconcile the consultation paper proposes expense with the books of accounts, accrual reporting of 'paid' foreign currency based data reporting may require expense for MPR. additional time for reconciliation and validation. It will be a challenge to If reporting is expected to be on an reconcile the same with books of accrual-basis, the MPR submission accounts within 5th of succeding timeline may require reconsideration, as month.

it may become operationally challenging to account for all the month end accruals, provisions, reversals, etc.

59 General/ SERF/ Portal related. We request clarification whether invoices are needed for each revenue captured or received by the bank Page 40 of 4560 Question 6: Any operational We request you to prescribe the or implementation issues that definition of the foreign currencies. We IFSC units may foresee in request your clarification whether reporting foreign-currency expenses in INR are required to be expense data under the reported in the report.

proposed framework.

We also request if conversion rate methodology/reference to be used for conversion in USD can be mentioned in the guideline.

Foreign currency revenue reporting in SERF to capture revenue at invoice level and at SAC code level.

61 Question 2: Whether there are Apart from the SAC codes listed down in These services are provided / any financial services Annexure C for Banking sector, the expected to be provided from GIFT commonly provided from or flowing SAC codes are required City within the IFSC that are not adequately covered under the 997112 : Deposit services proposed SAC code mapping 997157 : Foreign exchange services framework (refer Annexure 997159 : Other services auxiliary to C). financial services Page 41 of 4562 Question 3: Whether the We have following queries w.r.t It is not feasible provide details of

recommended SAC codes are reporting of Interest Income: interest earned on each transaction operationally practical and considering business volumes & suitable for reporting under (a) Considering interest income is: such information is also not required SERF. (i) exempt income under GST under GST Act.

(ii) booked on accrual basis & in multiple currencies, specific guidelines on reporting such income in SERF should be provided.

(b) Guidelines on reporting of Interest Income earned in “INR” in the SERF.

63 Question 5: Any suggestions Add: Foreign banks may have SLA’s with on major categories or types other branches / subsidiaries of the of foreign currency expenses (i) SLA payments in foreign currency to parent in India or overseas (refer Annexure B) that may other branches of Head office located in be relevant for inclusion for India the purpose of value-creation (ii) SLA payments in foreign currency to estimation. subsidiaries of Head Office located in India

(iii) Foreign currency payment to overseas branches of head office

(iv) payments of annual fees / other charges to IFSCA

(v) Fees paid for sell down of loans 64 Question 5: Any suggestions Expenses incurred in INR in the MPR IBU’s are incurring expenses in INR. on major categories or types Clarity on whether reporting such of foreign currency expenses expenses in the MPR considering (refer Annexure B) that may SEZ provisions is required.

be relevant for inclusion for the purpose of value-creation estimation.

Page 42 of 4565 Question 1: Whether the Banking Units operate in the IFSCA. proposed mapping (refer The nature of income includes the

Section 4) of sector-wise SAC following apart from interest income: code framework appropriately captures the nature and scope a. Upfront Fee income from Loans of financial services provided {whether the same can be shown by IFSC units. under the service code 997158. The 66 Question 2: Whether there are No. Clarification required on few other consultation paper is silent} any financial services items commonly provided from or b. Revaluation Gains from currency within the IFSC that are not fluctuations {Clarification required adequately covered under the under which code the same to be proposed SAC code mapping mapped} framework (refer Annexure C). c. Banking units earn income from sale of investments which is business income. Consultation paper is silent on the mapping of this income with the SAC codes.

d. Banking units earn income in the form of Amortisation of discount earned on the purchase of investments which is business income. Consultation paper is silent on the mapping of this income with the SAC codes.

67 Question 3: Whether the Yes, but needs clarification on the recommended SAC codes are responses submitted to Questions 1 & 2 operationally practical and suitable for reporting under SERF.

Page 43 of 4568 Question 4: Whether the Yes, but Banking Units operate in the IFSCA. proposed approach for clarification/inclusion required on few The nature of expense includes the capturing foreign currency other items following apart from the items listed

expenses in the MPR Form in the consultation paper: (refer Section 5) is appropriate for estimation of a. Banking Units may be required to net foreign currency value incur upfront fees on the borrowings creation from the IFSC. for their business purpose.

69 Question 5: Any suggestions Yes, but b. Revaluation Expense due on major categories or types clarification/inclusion required on few to currency fluctuations of foreign currency expenses other items c. Expenses related to (refer Annexure B) that may NOSTRO/SWIFT.

be relevant for inclusion for d. Expenses related to the purpose of value-creation Staff/employees. estimation. e. Banking units may be required to pay premium of investments/loans booked. The premium paid/incurred are to be amortised over the residual tenor of the asset. Consultation paper is silent on the mapping of this expense.

f. Other expenses incurred in INR like rental expenses paid to IFSC units and expenses incurred outside IFSC.

The above items of expenses should be incorporated in the detailed

circular/policy so as to align with the branch’s financial statements.

Page 44 of 4570 Question 6: Any operational Yes, but needs clarification on the or implementation issues that responses submitted to Questions 1 & 2 IFSC units may foresee in reporting foreign-currency expense data under the proposed framework.

Disclaimer: The comments/suggestions reproduced above have been received from external stakeholders in response to the Consultation Paper titled “Mapping of Services Accounting Codes (SAC) and Introduction of Foreign Currency Expense Reporting for IFSC Units under SERF and MPR”.

The comments/ suggestions are being published substantially as received, with limited editorial changes, where considered necessary, including for anonymisation. The views, interpretations, references or suggestions contained therein are those of the respective stakeholders and should not be construed as guidance, clarification, interpretation or position of the International Financial Services Centres Authority (IFSCA).

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