Public Comments and Suggestions on the draft notification to enable operating lease, including any hybrid of operating and financial lease, of GPU and connected data centre equipment in IFSC

Public Comments and Suggestions on the draft notification to enable operating lease, including any hybrid of operating and financial lease, of GPU and connected data centre equipment in IFSC Sr. Clause no. of the Text of the Comments/suggestion/ suggested Detailed rationale No. draft Notification / clause modification Annex 1 Clause 13(v) – Any “Any other IFSCA may consider incorporating (1) GPU and connected data centre equipment other matters that matters that may appropriate principles or guidance have characteristics that distinguish them from may be considered be considered for assessing and monitoring conventional leased assets. Rapid technology relevant for the relevant for the technology obsolescence and advancement and short technology refresh cycles proposed framework proposed residual-value risk associated with can materially affect the economic value of such for leasing of GPU framework for GPU and connected data centre equipment within a relatively short period. The and connected data leasing of GPU equipment leased through the consultation paper itself recognises that centre equipment in and connected IFSC. Such guidance may identify successive GPU generations can result in the IFSC. data centre broad parameters including the significant improvements in performance per watt equipment in the technology refresh cycle, remaining and notes that obsolescence risk, rather than IFSC.” useful economic life, asset utilisation, physical wear, is a principal determinant of asset expected secondary market demand, value.

asset condition and estimated end-of- lease value. (2) The consultation paper also identifies that operating leases can transfer obsolescence and residual-value risk to the lessor, who is better placed to price, manage and remarket the equipment. As GPU leasing is intended to facilitate access to high-value computing infrastructure and support the development of GIFT-IFSC as a regional hub for such leasing activity, a consistent approach to assessing these risks could strengthen the sustainability of the emerging leasing market.

(3) IFSCA may therefore consider establishing broad principles or minimum parameters that financial institutions and lessors may take intoaccount when assessing the technology lifecycle and residual value of leased GPU infrastructure.

Such parameters could include the expected technology refresh cycle, remaining useful economic life, utilisation intensity, asset condition, expected demand in the secondary market and potential for redeployment or remarketing at the end of the lease.

(4) Such guidance could support more consistent credit underwriting, lease pricing, risk assessment and residual-value estimation, while also helping lessors assess potential redeployment, remarketing and recovery strategies. It may consequently improve the ability of lessors and financial institutions to identify and manage the risks associated with rapidly evolving GPU technologies.

(5) The proposed approach need not prescribe a single valuation methodology or impose a uniform risk model. Instead, IFSCA could establish broad principles or minimum considerations while allowing regulated entities to develop their own internal assessment methodologies based on their risk appetite, asset expertise and market conditions. This would provide regulatory clarity while retaining flexibility as GPU technologies, secondary markets and leasing models continue to evolve.

2 Paragraph 13(iv) Question inviting Part B should be included within Paragraph 8 identifies the transfer of obsolescence views on the scope of the proposed and residual-value risk to a lessor better placed to Annexure II, Part B whether allied financial product. price, manage and remarket it as the economic (items 7–10) power, cooling basis for the proposal. Part B is the portion of the and thermal cluster where that pricing is actually possible.equipment set On parameters: we suggest the out in Part B of operative test be that the equipment Footnote 12 records a two-to-three year step Annexure II is dedicated to, and installed for, the change across successive accelerator should fall within leased compute — substantially the generations, and states that obsolescence rather the scope of the formulation the Authority has already than physical wear determines value in that class.

proposed used in Part B items 7 and 10 — Power distribution, precision cooling and chiller product, and on rather than a closed list of equipment plant do not follow that cycle; they track the design the parameters types. life of the facility and are not chip-generation for determining dependent.

such inclusion. A functional test of this kind is consistent with Explanation 2 to the Excluding Part B therefore removes from the lease draft notification and would keep the the only component carrying a stable residual, and scope durable as cooling leaves the lessee to fund the envelope from its own architectures move from air to liquid balance sheet — which reproduces the capital and immersion, without requiring the constraint the proposal exists to relieve.

matrix to be reopened.

Paragraph 5 already treats these assets as economically operable only as part of an integrated cluster. Aligning the scope of the product with that description also widens the pool of prospective lessors beyond those able to underwrite pure accelerator obsolescence, which is a condition for the regional hub outcome described at paragraph

11.

3 Paragraph 4 Proposal that, If this equipment is brought within the Several categories in the draft notification have following Leasing Framework, clause 14(c) of individual acquisition costs well below USD 10 read with clause consideration of that draft will apply, restricting a million — rack-scale systems (item ii), server 14(c) of the draft stakeholder Special Purpose Vehicle to holding power supply units (item iv), networking and Framework for feedback, Eligible products or equipment whose interconnect equipment (item v), and parts and Leasing Activity in operating lease acquisition cost is USD 10 million or accessories (item vi). Applied per item, the IFSC (consultation of GPU and above for each item. threshold would place most of the proposed scope of 13 August 2026) connected data We suggest that, as one of the outside the Special Purpose Vehicle structure.

centre modifications contemplated by equipment be paragraph 4, the threshold be applied That result is difficult to reconcile with clause 14(b) included under to the aggregate acquisition cost of of the draft Framework, which permits a Specialthe Framework Eligible products or equipment Purpose Vehicle to hold more than one Eligible for Leasing held within the Special Purpose product, and with paragraph 5 of this consultation, Activity in IFSC, Vehicle, rather than to each item which describes the assets as economically with such individually. operable only as part of an integrated cluster. The modifications as natural unit of ownership is the cluster; the may be threshold should be measured against it.

necessary.

The threshold as drafted appears calibrated to aircraft and ships, where a single unit routinely exceeds USD 10 million. An aggregate test preserves the evident purpose — reserving the ring-fenced vehicle for transactions of substance — while making it available to modular equipment classes.

4 Annexure I, clause "processing Amend Explanation 2 to expressly Explanation 2 is drafted around "accelerated

(i) read with units, whether or include central processing units computing", which risks a narrow construction

Explanation 2 not containing, (CPUs) and general-purpose excluding the general-purpose CPU tier of a in the same compute and storage servers cluster. No production AI cluster is operable housing, one or deployed as part of, or in support without CPU servers performing scheduling, two of the of, an AI / high-performance orchestration, storage services, networking following types computing cluster, including head control and data preparation; these are

of units: storage nodes, management, procured, financed and deployed as part of the units, input units orchestration and scheduling same integrated system. or output units, nodes, storage controller nodes including various and data pre-processing nodes, as Further, current-generation rack-scale systems types of storage well as combined CPU-accelerator integrate CPU and accelerator on a single module, units and allied modules ("superchips") in which a making any CPU/accelerator distinction parts and CPU and an accelerator are unworkable at the point of supply.

accessories"; supplied as a single module, board

Explanation 2 or tray. Ambiguity here would fragment a single integrated refers to cluster into leasable and non-leasable "accelerated components, contrary to paragraph 5 of the computing consultation paper, which recognises such assets equipment and as "economically operable only as part of an systems". integrated cluster".5 Annexure I, clauses Rack-scale Expressly include server racks, The rack or enclosure is the physical substrate of

(ii) and (vi); artificial cabinets, enclosures, rack frames, every deployment architecture — air-cooled, rear- Annexure II Part A, intelligence sliding rails, blanking panels and door heat exchanger fitted, or direct liquid cooled Sl. Nos. 2 and 6 systems hot aisle / cold-aisle containment — and is ordinarily supplied and financed together supplied and structures within scope, whether with the compute it houses.

invoiced as one supplied as part of an integrated integrated system or separately. Add Racks and containment typically classify under system; parts indicative CTH 9403 and 7326 to headings (9403 / 7326) that do not appear in the and accessories the Classification Matrix for such Matrix, and "mounting hardware" under clause (vi) including "trays, items. is insufficient to capture the enclosure itself.

mounting hardware, Explicit inclusion keeps the notified product spares and technology-neutral across rack architectures and replacement avoids classification disputes severing the parts". enclosure from the leased system.

6 Annexure I (new Part B, Sl. No. 9 Include within Part A (core scope), Current-generation rack-scale AI systems operate sub-clause); currently lists and within the draft notification at rack densities exceeding 100 kW and are liquid- Annexure II — move "Chillers, liquid- itself, direct liquid cooling (DLC) cooled by design; they are physically inoperable from Part B to Part A cooling and equipment integral to the without cold plates, manifolds and CDUs.

immersion- compute: cold plates, coolant Paragraph 3 of the consultation paper states the cooling distribution manifolds, in-rack and intent of covering accelerated computing devices equipment, in-row coolant distribution units "together with the equipment/s without which such including CDUs" (CDUs), quick-disconnect devices cannot be deployed in a data centre as allied couplings, coolant hoses and environment" — in-rack liquid cooling squarely equipment, piping internal to the rack or row, meets that test and is core, not allied, equipment.

inclusion of leak-detection apparatus, and rear which is an open door heat exchangers (RDHx). These components are frequently supplied by the

consultation Indicative CTH: 8418, 8419, 8481. system OEM as part of the integrated system, with question (item title and financing following the rack. Relegating iv). them to Part B (conditional inclusion) would sever the lease of a single integrated system into two regulatory categories.

7 Annexure II, Part B, "Precision air- Rear-door heat exchangers are heat- A passive or pumped-loop RDHx contains no air Sl. No. 8 conditioning exchange units, correctly referable to conditioning machinery and would not classify equipment for CTH 8419 (or 8418 where refrigerant- under 8415. While Explanation 3 correctly providesdata centre based), rather than 8415. Add 8419 that the functional description governs and the environments — to the Matrix and reflect RDHx within CTH references are indicative, an inaccurate 8415 — CRAC, Part A per the preceding comment, indicative reference invites avoidable disputes at CRAH, in-row retaining CRAC / CRAH / in-row DX the customs and regulatory interface. Heading and rear-door units under 8415 in Part B. 8419 does not presently appear anywhere in the cooling units". Matrix and should be added.

8 Public Comment Whether allied Yes — Part B should be included in A leased GPU cluster cannot ride through utility item (iv) — power, cooling full. The appropriate parameter is disturbance, and cannot be commissioned to Annexure II, Part B and thermal that the equipment be dedicated to, hyperscale service levels, without dedicated UPS (scope and equipment or predominantly serving, the leased and battery systems; these are presently absent parameters) specified in Part compute, whether located in-rack, in- from both Parts of the Matrix even though server B should be row or in dedicated plant / electrical PSUs are included. Allied power, cooling and included within rooms. thermal assets share the technology-refresh and the scope of the obsolescence profile of the compute they serve, proposed Part B should additionally be are financed as a single package with it, and are product and, if expanded to include: uninterruptible precisely the assets a lessor must control to so, the power supply (UPS) systems and remarket a cluster.

appropriate static converters at rack, row and parameters for room level (CTH 8504); battery A "dedicated or predominant use" test confines the determining cabinets and battery energy storage product to compute-serving plant and excludes such inclusion. systems dedicated to IT load (CTH shared building services, addressing any concern

8507); immersion-cooling tanks and of scope creep into general real-estate or facility dielectric coolant handling equipment assets. (CTH 8418 / 8419); and heat exchangers, dry coolers and heat- reuse equipment serving the leased compute (CTH 8419).

9 Annexure I, clause "Network Expand the illustrative coverage to Cluster-scale networking — scale-up and scale-

(v); Annexure II, Part switches, expressly name: data processing out fabric, adapters and optics — represents a A, Sl. No. 5 network access units (DPUs) and SmartNICs; material share of total cluster capital cost and is controllers and InfiniBand and Ethernet host integral to cluster operation. Scale-up fabric connected adapters; scale-up fabric components and optics are in practice sometimes networking and components (NVLink / NVSwitch- supplied, replaced or upgraded separately from the interconnect class switch trays, cable switch or compute trays; express naming avoids cartridges and backplanes), disputes as to whether such items fall withinequipment — whether supplied within a rack- "connected networking and interconnect 8517, 8544". scale system or separately; optical equipment" when supplied separately, consistent transceivers and modules; and with clause (vi).

active optical and direct-attach copper cables. Add indicative CTH 8542 and 9001 to Sl. No. 5 as applicable.

10 Annexure I, clause "Processing Expand the illustrative coverage to AI training and inference workloads are storage

(i); Annexure II, Part units, including expressly name high-performance intensive, and dedicated storage racks and parallel A, Sl. No. 1 storage units, and parallel file storage file systems are standard elements of a cluster bill input/output appliances, all-flash and NVMe of materials, procured and financed with the units and allied storage arrays, JBOD / JBOF compute. Express naming confirms that storage parts and enclosures, storage expansion deployed in dedicated racks — rather than "in the accessories — shelves, and associated storage same housing" as a processing unit — remains 8471, 8473 — networking equipment, whether within scope, which the current drafting of clause GPU / AI deployed within the compute rack (i) leaves open to doubt.

servers, or in dedicated storage racks. compute nodes and storage units".

11 Annexure I, Technology- The technology-neutral drafting of Footnote 12 of the consultation paper correctly Explanations 2 and 3 neutral Explanation 2 and the decoupling identifies obsolescence, not physical wear, as the

(general) descriptions from tariff classification in principal driver of asset value, with generational covering Explanation 3 are strongly supported. transitions occurring within two to three years. A successive It is suggested that Explanation 2 lessor's ability to remarket, upgrade and redeploy technology additionally confirm coverage assets across lessees — the core economic generations, irrespective of form factor — PCIe function recognised in paragraph 8 — requires that irrespective of add-in cards, SXM / OAM the notified product travel across generations and configuration, mezzanine modules, combined form factors without re-notification, and that mid- presentation, CPU-accelerator superchips, and life component upgrades (accelerator modules, supply or integrated compute, switch and optics, trays) remain within the same financial invoicing; CDU trays — whether supplied product as the systems they refresh.

decoupling of within a system or as spares, the financial replacements or upgrades. product fromcustoms tariff classification.

12 ---- Definitional (1) Provide clarity on hybrid (1) Financial lease is the activity of leasing where Clarity leasing model for GPUs. substantially all risks and rewards are transferred

whereas such risks and rewards are not

(2) Clarification on inclusion of sub- transferred in case of an operating lease . There is lease and bundled services under lack of clarity on the nature of hybrid leases for “Financial Product” GPUs and circumstances under which a lease transitions from an operating lease or a financial lease to a hybrid lease.

The Draft Notification should specify the accounting treatment and the regulatory capital treatment applicable to hybrid structures. Without such clarity, lessors and their auditors may face significant uncertainty.

(2) The Draft Notification indicates that the lease itself is to be classified as a “financial product”.

However, the Draft Notification does not address sub-leasing and bundled service (where the lease is packaged with maintenance, software, and managed services) frameworks.

A Lessor registered with the IFSCA for leasing of GPUs may lease the equipment to a non- registered entity that may further sub-lease the GPU equipment. In such a scenario, the lessee (sub-lessor) may be required to register with the IFSCA. Therefore, it would be helpful for the Authority to clarify whether this classification and obligations extend to sub-leasing arrangements and bundled service agreements.13 ----- Eligibility and (1) Provide Clarity on Lessee (1) Given that the Draft Notification distinguishes Registration Eligibility between public compute infrastructure (directed at Framework startups, researchers, academia, and public

(2) Provide More Detailed Criteria for institutions) and commercial requirements of cloud Lessor Eligibility operators, colocation providers, hyperscalers, and enterprises, the Authority should clarify whether there are any restrictions on the category of permissible lessees - for instance, whether Indian- resident entities, overseas entities, or both may lease GPUs from GIFT IFSC.

Since IFSC entities are treated as "persons resident outside India" under Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 and the International Financial Services Centres Authority (Finance Company) Regulations, 2021, every GPU lease to an Indian-resident lessee would constitute a cross- border transaction.

The aircraft leasing framework already restricts IFSC lessors from acquiring assets used solely by or for Indian residents, and applying a similar restriction to GPUs which, unlike aircraft and ships, are deployed at fixed locations to serve predominantly domestic workloads would render the framework commercially unviable and defeat its stated policy objective. The Authority should therefore expressly confirm that Indian-resident entities are permissible lessees and specify the applicable FEMA route and conditions.

(2) The framework should clearly prescribe the eligibility criteria for entities seeking to act as lessors, including minimum net worth or capitaladequacy requirements, fit-and-proper criteria for promoters and key managerial personnel, and whether existing IFSC-registered entities (such as finance companies or fund management entities) may undertake leasing activity under their current registrations or require a separate license.

14 Part B – Annex II Classification of Link the classification to the leased The Draft Notification states, “GPU and connected allied power, GPU/compute cluster data centre equipment refers to accelerated cooling and computing devices together with the servers, thermal storage, networking, interconnect and power equipment equipment used directly or indirectly in connection with the deployment and operation of such devices in a data centre, such assets being economically operable only as part of an integrated cluster”.

One of the primary requirements of being classified as a financial product is that the asset is a part of an integrated cluster. Therefore, classification of allied power, cooling and thermal equipment should be tied to the leased GPU/compute cluster. In the absence of such linkages, the

notification may be used to lease general power, cooling and thermal equipment.

Currently, the draft appears does not appear to contemplate such general leasing. However, should the Authority notify the present list of allied products, as provided under Part B of Annexure 2, as financial products, such leasing may occur.

Such clarification may become a part of the forthcoming framework for leasing GPUs and Connected Data Centre Equipment.15 Para 6 of Cross-Border Address Ambiguity on Customs and As India is entirely import-dependent for GPU Background Considerations Import Duties Treatment between equipment , the framework should address the SEZ and DTA Entities customs and import duty treatment of GPUs and connected equipment brought into GIFT IFSC (which enjoys customs duty exemptions as a Special Economic Zone) and, importantly, the duty implications if leased equipment is subsequently deployed or sub-leased into the Domestic Tariff Area (DTA).

Such clarification may become a part of the forthcoming framework for leasing GPUs and Connected Data Centre Equipment.

16 Draft Notification; Specifies list of Part B of Annexure II should also be (1) The draft notification presently does not Paragraphs 2(i)-(vi) leasable GPUs expressly included within the scope expressly include this Part B equipment within the of Annexure I of the and connected of the final notification as eligible scope of equipment that may be leased from an Consultation Paper DC equipment leasable equipment IFSC.

(Part A of Annexure II) but (2) We recommend that the equipment identified in does not include Part B of Annexure II also be expressly included equipment in within the scope of the final notification as eligible Part B of leasable equipment.

Annexure II

(3) From a commercial and financing perspective as well, it may therefore be artificial to require the GPU equipment to be financed or leased separately from the infrastructure that is integral to its operation. A customer procuring an AI compute deployment may seek a financing or leasing solution for the complete functional system rather than for individual components in isolation.

Excluding the Part B equipment could result in different elements of the same deployment having to be financed under separate structures, increasing transaction complexity andpotentially reducing the commercial utility of the proposed GIFT IFSC leasing framework.

(4) The approach adopted for other asset-leasing businesses is instructive. For example, the aircraft leasing framework accommodates not only the aircraft itself but also engines and other components associated with the operation of the aircraft. A similar principles based approach would be appropriate for GPU leasing, recognising that the relevant leasable asset may comprise an integrated collection of equipment required to deliver the intended compute capacity.

17 Draft Notification; The notification should expressly (1) We believe that this linkage should be made Annexure I of the ------ refer to Regulation 5(1)(iii)(g) of the explicit in the operative notification. It is important Consultation Paper FC Regulations to clarify that GPU for market participants to have clarity not only leasing is being permitted as a non- that GPU leasing constitutes a permitted core activity under this regulation of “financial product” but also which precise the FC Regulations. provision of the FC Regulations permits the activity to be undertaken.

(2) An express reference would therefore remove uncertainty as to the registration, regulatory and prudential treatment applicable to GPU leasing entities and would ensure that the proposed framework is fully integrated with the existing FC Regulations.

18 Draft Notification; The notification should expressly While the proposed framework contemplates Annexure I of the ------ clarify that Finance Companies / enabling GPU operating leasing as a financial Consultation Paper Finance Units undertaking only GPU product, the consultation paper does not expressly operating leasing as a non-core clarify the applicability of the exemption from the activity are exempt from Regulation 4 requirements of Regulation 4.

exposure norms on the same basis as aircraft and ship leasing entities. (1) Operating leasing of aircraft and ships is treated as a permitted non-core activity under the FCRegulations and the relevant leasing frameworks.

Accordingly, a Finance Company / Finance Unit undertaking only such operating leasing activities benefits from the exemption from Regulation 4, including the exposure ceiling. We submit that the same treatment should expressly extend to operating leasing of GPU and connected data centre equipment once such activity is notified as a permitted non-core activity under Regulation 5(1)(iii)(g) of the FC Regulations (as discussed in Sr. No. 17 above).

(2) Application of a counterparty exposure ceiling calculated by reference to the lessor's eligible capital base could therefore materially constrain the size of individual deployments and require disproportionate equity capitalisation of the lessor.

Such a result would be inconsistent with the prudential treatment.

19 Paragraph 9 of the Leasing of We recommend that this be revised (1) The reference to the lessor “owning” the Consultation Paper identified GPU to refer to situations “where the lessor hardware could be read as limiting the proposed equipment, owns or takes on lease” the relevant framework to structures where the IFSC lessor where the lessor hardware. itself holds legal title to the relevant GPU and owns and leases connected data centre equipment.

the hardware to a cloud operator, (2) We recommend that this be revised to refer to colocation situations “where the lessor owns or takes on provider or lease” the relevant hardware. enterprise, including (3) GPU leasing structures may also involve the through sale- lessor taking the equipment on lease from an and-leaseback OEM, equipment owner or another financing entity arrangements. and thereafter leasing or sub leasing such equipment to a cloud operator, colocation provider or enterprise. Such lease-in, lease-out and sub-leasing structures are common financing arrangements and may be particularly relevant in the development of the GPU leasing market.

(4) Paragraph 3 expressly states that the equipment leased out by a financial institution in IFSC may be held by it “either on ownership basis or on lease-in-lease-out basis.” The proposed clarification would therefore not expand the scope of the framework beyond IFSCA's stated intent;

rather, it would ensure that the final regulation does not inadvertently create uncertainty regarding the permissibility of lease-in-lease-out structures.

We accordingly suggest that the final notification recognises both ownership-based and lease-in- lease-out structures.

20 Paragraph (ii) of the The current Revise the draft to state as follows: (1) The components of a rack-scale AI system may Draft Notification at drafting refers to “rack-scale artificial intelligence be procured from different OEMs, vendors or Annexure I of the “rack-scale systems supplied as an integrated system integrators and may therefore be supplied Consultation Paper artificial system, whether invoiced together or under separate purchase orders and invoiced intelligence separately” separately. The fact that individual components are systems sourced or invoiced separately does not detract supplied and from their character as part of a single integrated invoiced as one rack-scale system when assembled and deployed.

integrated system” (2) We accordingly recommend that clause (ii) be revised to focus on the functional integration of the relevant equipment rather than the procurement or invoicing arrangements. This would ensure that an integrated rack-scale system remains within the scope of the notification irrespective of how its constituent components are procured or invoiced, while preserving the requirement that suchcomponents collectively form an integrated system when deployed.

21 Main paragraph of Operating lease, Confirm that a lease of GPU and GPU equipment differs from conventional leased the draft notification including any connected data centre equipment assets. Value of a GPU depends on computing enclosed in hybrid of shall be classified as an operating performance and computing performance falls Annexure I operating and lease, unless the lease contemplates sharply with each new generation (typically two to financial lease of or results in the transfer of ownership three years). A GPU retains little value once a GPU and of the equipment to the lessee, faster generation reaches the market.

connected data whether during the lease term or centre upon its expiry without reference to The above characteristics means a typical GPU equipment IND AS 116, and additionally clarify lease will substantially meet the markers under becomes a that finance leases, including pure Indian Accounting Standard 116 which financial finance leases, of GPUs, AI identifies a finance lease. For example, (i) the product. accelerators and connected data lease term will often cover most of the asset's centre equipment are also covered useful economic life, because that useful life is within the scope of the notified already short, (ii) the lease payments will often financial product. recover most of the asset's fair value, because the lessor has no secondary buyer and must recover cost from the one lessee it has, (iii) the asset will often qualify as specialised, because a GPU cluster is deployed for one customer's specific workload.

This reflects the underlying nature of the GPU which is inherent in nature.

This has a direct bearing on whether GPU leasing can proceed at all under the current draft. The draft notification permits only operating lease, including hybrid, as an eligible product.

Further, what constitutes “hybrid” is also not defined. If a GPU lease meets substantially the IND AS 116 markers for a finance lease in the manner described above, it would fall outside the scope the notification permits. Hence, we requestthat IFSCA confirms the classification outcome expressly.

22 Explanation 2 to the Define Retain the fixed list of connected data GPU technology is new to this market and still draft notification connected data centre equipment in Explanation 2 developing. The equipment that supports a GPU enclosed in centre and add a definition of “connected deployment today, such as particular cooling or Annexure I equipment equipment”. The term connected power configurations, may look different within a equipment can be defined to mean year or two, as chip generations and data centre the equipment set out in Explanation designs change.

2, and any other equipment that the leased GPU or accelerated A fixed list drawn up now will fall behind these computing equipment requires for changes, and each update to the list would need a deployment or operation in a data fresh notification from IFSCA. A definition of the centre. It should not include term “connected equipment” should resolve this equipment that serves the facility as problem.

a whole and is not dedicated to the leased GPU equipment.

23 Annexure II, Part B Lists cooling, air- Move power, cooling and thermal A GPU cluster cannot function without dedicated (items 7 to 10) conditioning, equipment dedicated to the leased cooling and power distribution at current power chiller and GPU pool from Part B into Part A as densities. This is not ancillary infrastructure.

power core equipment. distribution equipment as allied equipment in Part B, and invites comment on whether it should be included at all.

24 Para 9 of the Distinction A lessor under an equipment lease of In practice, a GPU leasing entity is sometimes consultation paper between GPU and connected data centre named as a party to the contract between the data equipment equipment shall not, by reason only centre entity and its end customer and may receive leasing and of being joined as a party to a contract income directly from that end customer rather than GPUaaS between the Lessee and the Lessee's from the data centre entity.

end customer, be treated as a provider of GPU as a Service orsimilar computing service, where the This structure is commonly used to give the GPU Lessor's rights and obligations under leasing entity and its lenders direct payment rights the contract with the end customer and enforcement comfort against the ultimate are limited to receipt of payment, source of cash flow.

enforcement rights, and step-in or comfort arrangements. Receiving payment directly from the end customer, on its own, should not turn the GPU leasing entity into a GPUaaS provider.

We ask IFSCA to confirm this expressly, so that payment structuring of this kind does not create uncertainty over how the lease is classified.

25 11(1)(a) and (1)(b) of (1) The Lessor Redraft clause 11(1) so that a hybrid As per clause 11(1)(b) hybrid lease is qualified as the Public may undertake lease of GPU and connected data a financial lease. Therefore, a GPU lease with consultation on the following centre equipment falls within sub- hybrid characteristics would fall under clause framework for activities in clause (a) as operating lease and not 11(1)(b) of this draft circular and would be leasing activity in the respect of within sub-clause (b) as financial classified as financial lease and hence not IFSC Eligible products lease. permitted to start with as per the draft circular on or equipment GPU leasing. Further, if hybrid lease sits within specified in clause 11(1)(b), then a typical GPU lease structure Annexure II to is classified as financial lease by default, and

this Framework: clause 13(1) then treats that activity as core activity, bringing capital adequacy and exposure

(a) Operating norms into consideration which does not seem to Lease; be the intention. If prudential norms apply to a GPU Or Lessor, the product may not work in practice. GPU deals are funded mainly through third-party debt,

(b) Financial and a Lessor built this way may not meet the 8% Lease, including capital adequacy ratio. The 25% exposure ceiling hybrid of raises a similar problem, since a GPU Lessor will operating and often lease to only one data centre entity, and financial lease. cannot spread its business across multiple lessees the way this norm assumes.If the GPU product is meant to operate as operating lease in substance and in intent as per the consultation paper circulated, this should be clarified directly.

Therefore, we ask IFSCA to confirm that a GPU hybrid lease falls within clause 11(1)(a) as operating lease and accordingly GPU leasing entities are not brought within financial lease treatment.

26 6(3) and 14(c) of the The Lessor Extend a simplified or fast tracked GPU financing structures may require one entity Public consultation intending to set registration process to any further per lender relationship for bankruptcy-remoteness, on framework for up an entity for asset holding entity that is a group even where every such entity sits under the same leasing activity in the the purpose of entity of an already registered ultimate beneficial owner. Requiring each such IFSC holding each lessor. entity to complete the full first-time registration asset separately process, when its ownership and control are shall obtain a OR already known to the authority from a prior separate registration, adds time and cost.

registration Prescribe a lower minimum under regulation acquisition cost threshold specific to Aircraft and ships are priced above USD 10 million 5(1)(iii)(m) of GPU and connected data centre practically. A single GPU leasing entity financing Finance equipment in place of the USD 10 one contract with one lender may be priced below Company million threshold that currently this threshold.

Regulations; applies uniformly across all eligible products.

Provided that where the Lessor intends to set up an entity in the form of Special Purpose Vehicle, the requirement for separateregistration shall not apply.

AND It shall hold only such Eligible product or equipment where the acquisition cost of each such product or equipment is USD 10 million or above

27. Complete list of HSN Codes to be included in proposal – reference to HSN codes is not made in the proposed

notification and is to be included in the leasing framework suitably

Note: During the public consultation, comments were received from various stakeholders. Modifications, if any, were suitably carried out based on the comments received from the stakeholders and placed before the Authority.