Global capability centres in India: designing for value, not cost

India hosts more than 1,800 global capability centres employing close to two million people, according to NASSCOM, and the number keeps rising. The first generation was built to save cost: a captive back office priced at cost plus a margin. Today's centres run engineering, analytics, finance, risk and increasingly AI programmes for their parents. That evolution is a business success story. It is also a structuring problem, because many centres are still organised, priced and governed as if they were the back office of fifteen years ago.

The mismatch at the heart of many GCCs

A typical centre is a subsidiary that provides services to its parent and is reimbursed at cost plus a fixed mark-up. That model is simple and defensible while the work is routine. It becomes harder to defend when the Indian team designs products, builds intellectual property, makes decisions and manages risk. Tax authorities, in India and in the parent's country, look at what people actually do, not what the intercompany agreement says, and the gap between the two is where disputes start.

Four design decisions that matter

1. The operating model

Is the centre a cost centre, a shared-services provider, a product and engineering hub or a co-owner of global capabilities? The answer drives the legal structure, the governance model, the talent strategy and the transfer pricing. Leadership should make it explicitly, revisit it as the centre's mandate grows and document the reasoning.

2. Transfer pricing that reflects reality

Remuneration should follow functions, assets and risks. For routine services, a cost-plus model remains appropriate, and India's safe harbour regime offers certainty. Budget 2026 announced a significant expansion: a single category for software development, IT-enabled services, knowledge-process services and contract R&D, a common safe harbour margin of 15.5%, and a much higher eligibility threshold of INR 2,000 crore, with approvals through a rule-based process. For centres doing higher-value work, a safe harbour may not fit, and an advance pricing agreement or a carefully documented policy will give more durable certainty.

3. Permanent establishment and people

As Indian leaders take on global roles, the risk grows that the parent is treated as having a taxable presence in India, or that the centre's leaders are treated as concluding contracts on the parent's behalf. Clear decision rights, reporting lines and documentation of where key decisions are taken are the main defences.

4. Location and incentives

State incentives and the tax regime for units in GIFT City's International Financial Services Centre can materially change the economics of a new centre or an expansion. They come with conditions on activities, substance and timelines, and they interact with global minimum tax rules for large groups. They should be modelled before the location is chosen, not after.

Governance that keeps pace

The centres that create the most value are run as businesses inside the group: clear service catalogues, measured outcomes, a governance forum with the parent and a finance function that can show what the centre delivers, not just what it costs. That same information is what auditors, tax authorities and boards ask for, so building it once serves every audience.

Where AI changes the equation

AI is reshaping what centres do. Routine processing is being automated, and centres are becoming the place where groups build and run their AI and automation programmes. That moves the centre further from a cost-plus service provider and closer to a developer of valuable intangibles, which raises the transfer pricing stakes again. Groups planning AI work in India should decide early who funds it, who controls it and who owns what it produces.

Questions for leadership

• Does the intercompany agreement still describe what the centre actually does?
• Is the centre's remuneration defensible in India and in the parent's jurisdiction at the same time?
• Does the expanded safe harbour now apply to us, and is it the right choice?
• Where are key decisions taken, and can we evidence it?
• Who will own the intellectual property created by AI and engineering work in India?

The bottom line

India's capability centres have outgrown the back-office model. Groups that redesign structure, pricing and governance to match the centre's real role will get more value from it and fewer disputes. Those that do not will find that the gap between the paperwork and the reality is the first thing a tax authority, auditor or acquirer finds.

Sources

• NASSCOM, India GCC landscape data (2025–2026), as reported by Taxsutra and Storyboard18
• Union Budget 2026 transfer pricing and safe harbour announcements; commentary by Trilegal, Nexdigm and Mondaq (2026)
• EY India, The future of Global Capability Centers in India: policy shifts (March 2026)

This article is general information, not advice. Safe harbour terms should be confirmed against the notified rules before relying on them.