Ahemdabad (ABC Live): IFSCA’s new consultation on SAC code mapping and foreign currency expense reporting may look technical. However, it reaches far beyond form design. In effect, it asks how GIFT IFSC should measure comparability, credibility, and net foreign-currency value creation. Comments are open until 29 April 2026

India’s International Financial Services Centre at GIFT City has reached a more demanding stage of growth. Broad claims are no longer enough. Instead, regulators now need data that is consistent, measurable, and comparable. That is why IFSCA’s latest consultation paper matters. It focuses on mapping Service Accounting Codes (SAC) and adding foreign currency expense reporting in the Service Exports Reporting Form and the Monthly Performance Report.

Why this consultation matters

At first glance, this may seem like a narrow filing reform. However, the proposal does much more. It aims to shift IFSC reporting from broad supervisory oversight to sharper economic measurement. In other words, IFSCA is trying to build a reporting structure that can better test the depth and credibility of IFSC activity. That broader trend also appeared in ABC Live’s earlier analysis of IFSCA’s report on independent financial advisers, which showed that GIFT IFSC regulation is becoming more data-led, more classification-driven, and more focused on ecosystem integrity.

The present consultation paper, available in the uploaded document and through the official IFSCA consultation paper link, proposes two key changes. First, IFSCA wants more standardised SAC-based classification of revenues reported by IFSC units under SERF. Second, it wants those units to report, through MPR, aggregate monthly expenses incurred in foreign currency so it can estimate net foreign-currency value creation.

That shift matters because the current framework captures gross receipts more clearly than the cost side. As a result, IFSC growth can be described through service exports and transaction flows, but net foreign-currency value remains harder to estimate. IFSCA now wants to close that gap.

What IFSCA has proposed

The consultation paper says IFSCA has found differences in service classification practices and in the scope of reporting across IFSC sectors and units. It also says that the absence of systematic foreign currency expense reporting limits consistency, comparability, and analytical usefulness.

Accordingly, the paper proposes three core steps:

• standardisation of SAC-based revenue reporting at the invoice level under SERF
• introduction of a new MPR field for foreign currency expenses
• estimation of net foreign-currency value creation using the formula FCVC = FCGR – FCEXP

Importantly, the paper also clarifies what it does not do. It does not propose new SAC codes or changes in tax treatment. It does not propose changes in regulatory obligations, liability, or incentives. That matters because it frames the reform as a reporting and analytics exercise rather than an open expansion of substantive compliance.

Why the proposal is important

Moving from gross activity to net value

The strongest feature of the consultation paper is its basic logic. IFSCA has recognised that gross revenue alone does not show the true quality of IFSC activity. A sector may report high foreign currency receipts, but large offshore expenses may reduce the actual net value retained within the ecosystem.

Therefore, this is more than a routine form change. It reflects a more mature policy approach and accepts that economic contribution cannot be judged solely by top-line figures. It also accepts that regulatory intelligence improves when the cost side is visible.

Recognising different IFSC business models

The paper also correctly notes that IFSC entities do not earn in the same way. Some use fee-based models. Others depend on commissions, margins, spreads, leasing structures, or insurance flows. Banking, fund management, broking, insurance, leasing, bullion, fintech, and ancillary services all generate revenue in different ways. So, without better classification, even basic comparison becomes unreliable.

Why SAC standardisation is necessary

IFSCA says its review of SERF filings found inconsistent use of SAC codes, use of broad or residual codes for multiple service types, and reporting that did not clearly reflect the underlying service income.

That diagnosis is persuasive.

Without standardised classification, the regulator cannot confidently assess which IFSC sectors generate the strongest foreign currency surplus, which business lines are scaling fastest, which activities are export-facing, and which support services are deepening the ecosystem. A modern IFSC cannot run on narrative alone. It needs a reporting structure that enables like-for-like comparisons. In that sense, IFSCA is trying to build a common reporting language for a diverse financial centre.

Where the paper remains weak

SAC mapping is harder than the draft suggests

Here lies the main weakness.

The paper assumes that a sector-wise indicative SAC list will materially improve consistency. It probably will. However, it will do so only up to a point. In real practice, many IFSC transactions involve hybrid or bundled services. A single revenue stream may include advisory, execution, transaction processing, custody, platform access, clearing support, risk transfer, documentation, or software-linked services.

The paper says classification should depend on the nature of the service provided and the income earned, rather than underlying asset values or balances. That principle is sound. Even so, it is not enough on its own. The document does not provide detailed rules for mixed-service transactions, dominant-versus-incidental elements, or multi-component contracts.

As a result, two firms with similar business models may still classify the same revenue differently. So, while the reform may reduce inconsistency, it may not remove it.

“Indicative” guidance may become mandatory in practice

The paper presents its SAC mapping as a recommended framework. Yet, once the regulator starts reviewing filings against that framework, recommended classifications can quickly become mandatory in practice. That is a familiar reality in reporting systems.

This creates a deeper issue. SAC codes arise under the GST framework, while IFSCA is adapting them for regulatory and analytical use within the IFSC context. The paper does not fully explain what happens when a reporting classification under the IFSCA framework differs from a firm’s understanding of its SAC position for tax or accounting purposes.

That gap needs attention. Otherwise, firms may face uncertainty not because the proposal is flawed in principle, but because it sits at the intersection of several compliance logics.

Why the expense proposal is useful but incomplete

IFSCA proposes a separate MPR field titled “Expenses (paid in foreign currencies, converted into USD)”.

The direction is sensible. However, the design is still incomplete.

First, the timing issue

Revenue may be booked in one month, while the related foreign-currency expense may be incurred or recognised in another month. Consequently, a simple monthly netting formula may produce distorted snapshots, especially in sectors such as insurance, reinsurance, leasing, and structured finance.

Second, the conversion issue

The consultation paper does not yet specify the exchange-rate source, valuation date, conversion convention, or whether monthly averages will be allowed. That omission matters because FX methodology can materially change reported numbers.

Third, the attribution issue

Not all foreign-currency expenses carry the same meaning. Some are direct operating costs. Others are shared-service charges, intra-group recharges, or pass-through items. Some may even relate to capital expenditure or structured funding rather than normal service delivery. Annexure B gives an indicative list, but it does not fully solve these distinctions.

Fourth, the “value creation” issue

The formula FCVC = FCGR – FCEXP may work as a regulatory proxy. However, it should not be confused with strict economic value added, national income contribution, or profitability. It is better understood as an analytical indicator rather than a complete macroeconomic measure.

That distinction is crucial. Otherwise, the final metric may be used too broadly in policy messaging.

What Annexure B gets right

Annexure B is one of the more practical parts of the paper. It identifies sector-specific foreign currency expenses across banking, finance companies, capital markets, insurance, fintech, bullion, and foreign university branches. It includes categories such as interest expense, lease payments, software licence fees, fund administrator cost, regulatory fees, bank charges, brokerage, reinsurance premium, risk management charges, and legal or consultancy expenses. The tables on pages 8 to 10 show that IFSCA is trying to understand real operating models rather than impose a flat template.

Even so, the annexure also uses broad residual phrases such as “any other Forex charges incurred.” That wording may be unavoidable at this stage. However, it also weakens comparability. If those residual heads become large buckets, the new system may still produce uneven data quality.

What Annexure C gets right — and what it still misses

Annexure C maps indicative SAC codes across sectors such as banking, capital markets, fund management entities, ancillary services, finance companies, fintech, insurance, metals and commodities, and foreign universities. The tables on pages 11 and 12 show that IFSCA sees the IFSC as more than a banking enclave. They include legal, accounting, management consulting, IT support, leasing, brokerage, custody, reinsurance, actuarial, and education-related services within the broader ecosystem.

That is an important strength. It reflects a more realistic understanding of how a financial centre matures.

However, the annexure still lacks the one thing users will need most: worked examples. A list of codes is helpful, but it does not resolve classification conflicts. Where two SAC codes appear equally plausible, the paper does not say which rule should govern. For bundled services that combine advisory and execution components, it remains unclear which code should prevail. Similarly, when a legal or compliance support function is embedded within a financial services contract, the reporting treatment remains uncertain.

The paper does not yet answer those questions. Therefore, the framework is promising, but not yet complete.

Sector-wise implications

Banking and capital markets

For banking units, brokers, clearing members, depositories, custodians, and market infrastructure institutions, overlap between service categories is common. Transaction processing, custody, brokerage, and auxiliary financial support often intersect. The proposed SAC list helps. Still, it would help to include examples tied to actual IFSC transactions.

Finance company and leasing structures

The paper is stronger here. It recognises aircraft leasing, ship leasing, ITFS platforms, and core and non-core finance companies. It also recognises interest expense, lease payments, forex expense, and amortisation-type costs in Annexure B. That is useful because these sectors often shape GIFT IFSC’s global profile.

However, cross-border leasing structures can involve layered SPVs, financing arrangements, and related-party flows. The current draft does not explain how those features should be normalised for reporting consistency.

Ancillary services

Annexure C usefully includes legal advisory, legal documentation, auditing, bookkeeping, tax consulting, and management consulting within ancillary IFSC services. That matters because no international financial centre deepens without a professional infrastructure.

However, the paper does not explain how ancillary providers should report work that serves both IFSC and non-IFSC or domestic clients. That allocation issue may become difficult in practice.

Insurance and reinsurance

The paper’s insurance coverage is impressively granular. It includes life insurance, accident and health insurance, freight insurance, multiple reinsurance categories, brokerage, claims adjustment, actuarial services, and auxiliary insurance services.

Still, insurance economics can vary sharply month to month. Claims, premiums, brokerage, risk transfer, and reinsurance payments do not always align neatly inside a simple monthly netting model. So, while the reporting proposal is analytically useful, it may also produce volatility that does not fully reflect business performance.

The hidden compliance cost

Although the paper says it does not change regulatory obligations, implementation will still impose compliance costs. Firms may need to revise invoice-level classification practices, internal ERP and MIS logic, FX conversion controls, chart-of-accounts alignment, and reconciliation between SERF, MPR, finance books, and group reporting systems.

For large entities, that may be manageable. However, for smaller IFSC units, it may require a significant overhaul of reporting. The paper does not quantify that burden. That omission does not defeat the proposal, but it does weaken its implementation realism.

What should IFSCA do next?

IFSCA should not abandon this proposal. Instead, it should refine it before finalisation.

The final framework would be stronger with:

• sector-specific worked examples
• safe-harbour rules where more than one SAC code is plausible
• a clear FX conversion methodology
• distinction between pass-through expenses and true operating costs
• guidance on related-party charges and shared-service allocation
• materiality thresholds for minor expense heads
• a phased rollout and parallel reporting trial period

These additions would turn a useful consultation into a more reliable reporting reform.

Why ABC Live is publishing this report

This consultation paper may look technical. However, its implications are much wider. Reporting architecture shapes policy. Policy shapes incentives. Incentives shape growth. Therefore, technical reporting reforms often carry strategic importance far beyond form design.

That is why this paper deserves scrutiny before the consultation window closes on 29 April 2026.

Final assessment

IFSCA is moving in the right direction. The consultation paper correctly identifies two major reporting weaknesses: inconsistent SAC classification and the absence of systematic foreign currency expense reporting. It also takes an important next step by shifting IFSC analysis from gross receipts toward a net-value framework.

However, the draft is still stronger in diagnosis than in implementation design. It would benefit from clearer guidance on hybrid services, cost attribution, FX conversion, and the limits of its “value creation” metric. Without that clarity, the framework may improve reporting form while leaving reporting substance uneven.

So the reform is necessary. It is also timely. Yet it should not be finalised in a skeletal form. If IFSCA adds worked examples, operational rules, and phased implementation support, this consultation could become a strong building block in IFSC regulatory maturity. If not, it may create cleaner templates without creating equally reliable data.

How We Verified This Report

ABC Live’s analysis is based on the IFSCA consultation paper titled “Mapping of Services Accounting Codes (SAC) and Introduction of Foreign Currency Expense Reporting for IFSC Units under SERF and MPR”, including its main text, consultation questions, and Annexures B and C. We reviewed the paper’s stated objectives, the proposed FCVC formula, the sector-wise indicative expense lists, and the SAC mapping tables in the later pages.