Overview
India’s Global Capability Centre (“GCC”) ecosystem has entered a new phase of strategic maturity. What was once a cost-efficient offshore delivery play has evolved into a strategic pillar for multinational corporations — spanning product engineering, digital transformation, enterprise technology, Artificial Intelligence (“AI“) data and analytics, finance, compliance, and increasingly, sustainability enablement. As supply chains and operating models are reconfigured in response to shifting trade alignments and geopolitical volatility, India is simultaneously accelerating its tax policy and regulatory environment to anchor global technology and data infrastructure domestically, which is reshaping the operating environment for GCCs in India.
1. GCCs in India: scale, strategic relevance and contribution to the economy
With over 1,800 GCCs that employ over 2 million professionals1, India hosts one of the world’s largest GCC ecosystems that contributes to about 2% of India’s gross domestic product (“GDP“)2. Over the past decade, the GCC model has become central to India’s services exports and its role in global digital value chains. While earlier generations of GCCs were primarily focused on Information Technology (“IT“) support, finance shared services, and standardized back-office functions, the new wave of GCCs is increasingly built around high-value workstreams, including advanced engineering and research and development (“R&D“), cybersecurity and cloud transformation, enterprise AI and data platforms, analytics, global finance and controllership, and sustainability reporting and governance3. As per an EY report, 58% GCCs are currently investing in Agentic AI and another 29% planning to scale over the next year; two-thirds of GCCs are creating dedicated innovation teams and incubation programs to generate, test and globalize ideas from India. Further, GCCs in India are becoming key collaborators in global decision-making with 52% of GCCs holding shared accountability for global decisions, while another 26% are formally consulted4. GCCs also play a broader macroeconomic role: they deepen India’s integration into global corporate operations, expand skilled employment, and act as a steady source of foreign exchange through services exports.
2. The renewed importance of data centres and GCCs in a volatile global economy
The current global environment is characterized by heightened uncertainty. Renewed international trade developments have strengthened the trend of global companies reassessing where they place critical technology work, data processing, and global business functions. At the same time, evolving trade deals and trade policy signalling are encouraging firms to diversify operational footprints and reduce single-country dependencies5. In this context, India’s GCC proposition is increasingly framed around strategic resilience rather than cost arbitrage. The 2026 Economic Survey6 emphasis on moving from resilience to “economic indispensability” reflects a shift in strategic ambition: rather than being merely a competitive alternative, India seeks to become deeply embedded in global business architecture. As GCCs become more data-intensive and AI-enabled, data centre infrastructure becomes a critical enabling layer for global service delivery, regulated data processing, large-scale enterprise analytics, AI model training, and cybersecurity7.
3. Extant key tax considerations
From a tax standpoint, establishing and operating a GCC in India requires careful planning across multiple fronts — from choosing the optimal legal form (e.g., private limited company vs. limited liability partnership) to structuring cross-border repatriation, evaluating eligibility to tax treaty benefits, and assessing indirect tax incentives. Significant risks often arise from Permanent Establishment (“PE“) exposure and transfer pricing obligations. The Supreme Court’s ruling in Hyatt International8 underscores how operational control and inadequate economic substance can trigger PE risks and local tax liabilities, emphasising the need for robust structures and documentation to mitigate exposure. Similarly, related-party arrangements must be supported by arm’s-length transfer pricing methodologies. GCCs also need to address other facets like IP transfers, incentive structuring, and withholding tax compliance. A proactive, governance-led approach, with clear intercompany agreements, sound documentation and alignment to evolving global and Indian tax norms, is therefore critical to reducing disputes, optimising tax costs and supporting sustainable, long-term GCC operations. Further details in this regard are available in our past publication on this subject – Global Capability Centre (GCC) in India Key Tax Considerations – Trilegal.
4. Policy push: Union Budget 2026–27 proposals relevant for GCCs
In line with the economic objectives set out above, the Union Budget 2026–27 has introduced various tax and policy proposals aimed at strengthening India’s status as a global technology hub, including proposals aimed at encouraging the establishment of GCCs and data centres in India. As per a KPMG and NASSCOM survey of GCC leaders, 81% cite transfer pricing as a top regulatory priority9. Industry bodies such as NASSCOM have several times in the past made suggestions to the Ministry of Finance, including on implementing measures to make safe harbour provisions attractive for GCCs10, increasing eligibility limits for safe harbour provisions11, and simplification of the safe harbour margin rate categories in India; the Union Budget 2026–27 proposals look to directly address these concerns.
Rationalization of transfer pricing norms for IT services:
- Specified IT services (including software development services, IT enabled services, knowledge process outsourcing services) are proposed to be clubbed into a single category with a common safe harbour margin of 15.5%.
- Threshold for safe harbour for IT services is proposed to be increased from INR 300 crore to INR 2,000 crore.
- The approval process would be automated and rule-driven, without any need for tax officer to examine and intervene. Once applied for by an IT services company, the same safe harbour could continue for a period of 5 years at a stretch at its choice.
These proposals, in line with long-standing industry demands to simplify the multi-rate safe harbour margin structure across several services, and significantly increase the eligibility thresholds, are likely to further incentivise the shifting of higher value-added tech functions to GCCs in India. Coupled with automated, rule-driven approvals and continuity for five years, these could significantly lower entry and compliance barriers for GCCs.
Fast-tracking of advance pricing agreement (“APA”):
- The unilateral APA process for specified IT services is proposed to be fast-tracked, with an endeavour to conclude such APAs within a period of two years, extendable by a further six months at the taxpayer’s request.
- Amendments have been proposed to extend the facility of modified returns, which is currently available to the entity entering into APA, to its associated entity as well, where the income of such associated entity is modified as a result of the APA.
Proposed amendment for intermediary services under Goods and Services Tax (“GST”) laws:
An amendment has been proposed to the ‘place of supply’ rule for ‘intermediary services’, which currently deems the place of supply for intermediary services to be the location of the supplier. Once this amendment comes into effect, the place of supply for intermediary services would instead be aligned with the recipient’s location. This is particularly relevant for GCCs, because many GCC service models (such as procurement support, customer support and cross-border coordination roles) have historically faced risks of being characterised as ‘intermediary services’; aligning the place of supply of such services to the service recipient’s location (typically overseas in the case of GCCs) may help strengthen the ‘export’ or ‘zero-rating’ characterization of services, reducing GST leakages and litigation risk.
Tax holiday for foreign cloud service providers:
A long-term tax holiday is proposed till 2047, for foreign companies providing cloud services to customers globally by using data centre services from specified entities in India, subject to proposed conditions including: (i) the foreign company must provide cloud services to customers worldwide using data centre services located in India (i.e., it should procure services from a ‘specified data centre’ set up under an approved scheme and notified by the Ministry of Electronics and Information Technology); (ii) the foreign company would need to provide services to Indian customers through an Indian reseller entity; and (iii) the foreign service provider must not own or operate the physical infrastructure or resources of the Indian data centre from which it procures services.
Safe harbour for GCC data centres:
A safe harbour of 15% on cost is proposed specifically for specified Indian GCC entities providing data centre services to its related entity. The explicit inclusion of data centre services at a safe harbour margin of 15% supports capital intensive, digital first GCC operating models, bolstering India’s position as a global service hub.
International Financial Services Centre (“IFSC”):
The tax holiday available to units in the IFSC has been increased to 20 consecutive years out of the 25-year period, and eligible business income after expiry of the holiday period will be taxed at 15%. The IFSC had proven popular for GCCs in the financial services sector and these benefits may further sweeten the deal for banks and financial institutions looking to set up shop there.
Potential risks and concerns:
GCCs must assess emerging international tax risks, particularly concerning business connection (including significant economic presence) under Indian tax laws and tax treaty eligibility, pursuant to the Supreme Court ruling in Tiger Global12. The judgement marks a significant departure from long-standing jurisprudence and establishes that a Tax Residency Certificate alone may not be sufficient to claim treaty benefits. Foreign companies may have to demonstrate genuine commercial and economic substance in their jurisdiction of residence. Further, foreign companies must assess if the burden of proof may have increased or shifted on the foreign company to establish that any arrangement is not a conduit or a sham once anti-abuse provisions are invoked. The confluence of increased business connection related tax risks and heightened substance requirements for claiming treaty benefits poses a risk that the GCCs and their parent entities must carefully evaluate.
5. Emerging ESG considerations for GCCs
GCCs in India are increasingly being integrated into global ESG compliance, not merely as operational support units but as core enablers of ESG data, controls, and assurance-ready reporting13. This is driven by a convergence of (i) expanding cross-border sustainability regulation, (ii) tightening domestic disclosure and governance requirements, and (iii) investor and lender expectations that increasingly treat emissions and transition readiness as credit and valuation variables.
Cross-border ESG obligations:
Cross-border ESG obligations are likely to flow down to India-based GCC operations. Depending on the jurisdiction of the parent entity, GCCs may need to be structured and operated to align with parent-country ESG obligations, including the European Union (“EU“) Corporate Sustainability Due Diligence Directive (“CSDDD“) and broader sustainability reporting ecosystem. The CSDDD, approved by the EU Parliament14, looks to oblige covered EU companies (based on employee and turnover thresholds) to identify human rights and certain environmental risks across their value chains (including direct and indirect suppliers such as their GCCs), take preventive and remedial measures, and report on such measures. For GCCs, the practical consequence could be that ESG reporting may increasingly require: (a) structured data collection from India (greenhouse gas emissions, energy usage, water, waste and supplier information); (b) internal controls and audit trails for sustainability metrics; and (c) alignment between sustainability reporting systems and financial reporting architecture.
Evolving domestic regime:
India’s domestic ESG regime is also tightening. The Securities Exchange Board of India has strengthened the Business Responsibility and Sustainability Report (“BRSR“) regime by introducing BRSR ‘core’ requirements for the top 1,000 listed companies15, mandating assurance on key ESG metrics to improve transparency and comparability. The Reserve Bank of India has acknowledged climate-related financial risk as a material concern for financial stability, and over recent years has issued discussion papers, draft disclosure frameworks on climate-related financial risks, and other climate-related guidance to regulated entities16. The Ministry of Corporate Affairs has signalled a policy direction towards strengthening board-level oversight of sustainability matters, including through possible amendments to the Companies Act, 201317. Separately, the Supreme Court has recently recognised that environmental protection and the impacts of climate change fall within the scope of fundamental rights under Articles 21 and 14 of the Indian Constitution18.
Enforcement against greenwashing:
A related and increasingly important theme is enforcement against greenwashing. In India, the Central Consumer Protection Authority has issued the Prevention and Regulation of Greenwashing Guidelines, and the Advertising Standards Council of India has issued guidelines aimed at preventing misleading environmental claims. This is relevant for GCCs because sustainability narratives increasingly intersect with employer branding, operational claims, procurement standards, and enterprise-wide disclosures.
Group reporting outsourcing:
Importantly, GCCs are uniquely positioned to serve as ESG data engines for multinational organisations. GCCs hold extensive operational and financial data and can support global headquarters in building reliable sustainability reporting pipelines. According to the EY India ESG GCC Survey 202419, 51% of Indian GCCs have already started assisting global headquarters to advance the ESG agenda, and 70% are collaborating with technology and analytics teams to strengthen ESG reporting architectures.
Intersection of sustainability with trade policy:
Finally, sustainability considerations are increasingly intersecting with trade policy. The India–EU trade negotiations, including through a dedicated trade and sustainable development chapter20, reflect a trajectory where ESG-linked requirements may become more closely tied to market access and supply chain expectations. For multinational groups with EU exposure, this reinforces the need for India-based GCC operations to be structured for due diligence readiness, auditability and reliable ESG data capture across operations and vendors.
Conclusion
India’s GCC ecosystem is being shaped in 2026 by a convergence of global and domestic forces. On one hand, multinational groups are seeking operational resilience and geographic diversification in response to tariff risks, trade fragmentation and geopolitical uncertainty. On the other, India is advancing a policy agenda aimed at anchoring global technology, data infrastructure and high-value enterprise functions domestically, aligned with the Economic Survey’s vision of economic indispensability.
The Union Budget 2026–27 signals a clear intent to streamline transfer pricing compliance, provide long-term certainty for data centre and cloud-linked operating models, and enhance India’s competitiveness as a GCC destination. At the same time, ESG expectations, both global and domestic, are increasing rapidly, and GCCs will increasingly be required to operate as assurance-ready data and governance engines for multinational sustainability reporting.
For organisations evaluating India’s GCC proposition in 2026, the strategic question is no longer whether India can deliver scale and talent. The question is whether India can serve as the enterprise’s long-term global capability backbone, across technology, data, governance and sustainability; the current policy direction suggests that India intends to do precisely that.
– Meyyappan Nagappan (Partner), Karan Ganna (Senior Associate), Priyanshi Shah (Associate)
[1] Confederation of Indian Industry, 15 September 2025, ‘CII charts roadmap for India’s next phase of global leadership in knowledge industries‘
[2] Fortune India, 15 July 2025, ‘GCCs set to contribute $100–150 billion to India’s GDP by 2030: Finance Minister Nirmala Sitharaman‘
[3] PwC, 22 June 2025 ‘India GCCs set to generate value at 11–12% CAGR between FY25-29‘
[4] EY India GCC Pulse Survey 2025
[5] The Economic Times, 25 September 2025, ‘Global South countries need to reduce dependence on any single supplier or market: Jaishankar‘
[6] Ministry of Finance, 1 February 2026, ‘Economic Survey 2025-2026‘
[7] EY, 25 November 2025, ‘India’s GCCs driving Intelligent, AI-native enterprise shift‘
[8] Hyatt International Southwest Asia Ltd. v Additional Director of Income-tax (Civil Appeal No. 9766 of 2025)
[9] KPMG and NASSCOM, May 2024, ‘GCCs in India: Building resilience for sustainable growth‘
[10] NASSCOM’s Suggestions for Union Budget 2025-26
[11] Business Standard, 1 July 2024, ‘Budget 2024: NASSCOM seeks lighter taxation environment for tech industry‘
[12] Authority of Advance Rulings (Income Tax) and Others v Tiger Global International II Holdings (Civil Appeal No. 262 of 2026) (Supreme Court)
[13] EY India’s EY India ESG GCC Survey 2024
[14] Directive (EU) 2024/1760 of the European Parliament and of the Council, 13 June 2024
[15] Circular SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122 dated 12 July 2023
[16] The Economic Times BFSI, 29 February 2024, ‘Reserve Bank Of India: India cenbank releases draft disclosure framework for banks to address climate risks‘
[17] Ministry of Corporate Affairs, August 2025, Twenty First Report
[18] M.K. Ranjitsinh & Ors. v Union of India & Ors. (2024 INSC 280) (Supreme Court)
[19] EY India’s EY India ESG GCC Survey 2024
[20] Ministry of Commerce and Industry, 29 January 2026, ‘Frequently Asked Questions India and European Union Free Trade Agreement’
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