India's GCCs Too Big to Bill Lightly

Backend hubs face tax claims that question who's really in charge

- MONIKA YADAV

India has become a go-to destination for many foreign companies looking to set up back offices or tech hubs—known as global capability centers (GCCs). These centers handle information technology (IT) services, finance, customer support, software development, and more, primarily for parent companies based in the US, Europe, or elsewhere.

Recently, at an event hosted by the Confederation of Indian Industry, Finance Minister Nirmala Sitharaman said: "There are about 1,800 GCCs in India, employing nearly 2.16 million professionals. The compound annual growth rate has been 11 percent over five years. And this number of 2.16 million is expected to rise to 2.8 million by 2030."

But as these centers have grown—not just in size but also in scope—the Indian tax department has begun to take a closer look, according to experts.

The big question: Are these companies paying their fair share of taxes in India? That question has triggered a series of tax disputes between foreign firms and Indian authorities.

The tug-of-profit

Most foreign companies compensate their Indian units using a method called 'cost-plus', which means reimbursing all local expenses (salaries, rent, etc.) and taking a small profit margin—typically 10-15 percent.

"Indian tax authorities argue that since a large portion of the actual work—IT support, backend processing, or analytics—is carried out in India by Indian employees, the country deserves a bigger share of the global profits. That's why they challenge the traditional cost-plus model," says Sandeep Bhalla, partner at Dhruva Advisors.

But companies counter that strategic decisions, client relationships, intellectual property (IP), and risk-taking remain anchored at their global headquarters. "They argue the real value is created outside India, and that local units shouldn't be taxed as if they control the entire business," Bhalla adds.