The segment’s revenue has almost doubled over the past five years to cross $70 billion.
India’s latest Union Budget 2006 has delivered a strong policy push for the IT and ITeS sector, especially for GCCs. The key reform is the expansion of the safe harbour rule in transfer pricing. Companies declaring a profit margin of 15.5% can now qualify for a green channel route, reducing the risk of tax scrutiny.
The turnover threshold for this benefit has been sharply raised from ₹300 crore to ₹2,000 crore. This move significantly widens the scope and is expected to benefit a large number of mid-sized and growing GCCs.
The safe harbour provision is especially important because most GCCs operate on a cost-plus model. With a defined 15.5% margin ensuring smoother tax assessment, companies now get greater certainty. This reduces compliance risk and makes long-term planning easier.
Ganesh Baliga, MD and Head at Citi India Solutions, said the reform removes ambiguity that earlier affected complex functions like finance and tax calculations. Earlier, such services could face challenges in assessment due to differences in interpretation.
He explained the impact in simple terms: “Suddenly our volume gets matched with value because some of the other countries who we compete with had much better certitude and valuations around how they were calculating tax. So, it’s just a great advantage.”
This suggests that India’s GCC story is moving beyond just handling large volumes of work. Higher-value and tech-enabled services such as AI, quantum computing, financial analytics, and advanced tax processing may now scale up faster.
The Budget has also streamlined the Advance Pricing Agreement (APA) process, aiming to close unilateral APAs within two years. Faster closures mean quicker resolution and improved ease of doing business.
Beyond taxation, provisions related to data centres and incentives in GIFT City for BFSI firms further strengthen India’s appeal. Together, these measures create a stable policy environment for long-term foreign investment in services exports.
For the entire discussion, watch the accompanying video
