E-Paper
India’s GCC advantage: From cost efficiency to global capability leadership
This article is authored by Vishwang Desai, Managing Partner, Desai & Diwanji.
India’s Global Capability Center (GCC) ecosystem was already emerging as a higher‑value strategic asset long before Budget 2026 was unveiled on February 1 2026. Yet, this year’s Budget marked a decisive moment in policy design—one that goes beyond incremental support for technology to address foundational constraints that matter most to global corporations. For multinational boards deciding where to locate high‑end digital functions, risk governance hubs, and data‑intensive capabilities, the Budget strengthens India’s case by offering tax certainty, legal clarity, and strategic infrastructure incentives.
In the “before” world, India’s GCC proposition was anchored in operating cost advantages and a deep software talent pool. Companies set up shared services and transactional centres here because of skilled graduates and competitive remuneration. But as GCC mandates matured to include cloud engineering, Artificial Intelligence (AI) system development, cybersecurity operations, global data platforms, and regulated functions, the determinants of choice shifted. Boards began evaluating policy certainty, capital‑intensive infrastructure tax treatment, cross‑border legal issues, transfer pricing frameworks, and long‑run investment horizons—areas where ambiguities previously slowed commitment or forced structural workarounds.
Budget 2026 systematically confronts these issues, signalling a clear policy intent: India must not only host high‑value services, but also be a base for long‑duration, enterprise‑critical capability. Two headline measures illustrate this.
First, the Budget introduces a long‑term tax holiday for foreign cloud and data centre‑enabled services located in India until 2047. Under this provision, global cloud service companies that use Indian data centres to deliver services to customers worldwide will be exempt from income tax until 2047, provided they serve Indian customers through an Indian reseller entity. This move is designed to attract sustained capital flows into data centre and digital infrastructure and make India a globally competitive node for cloud and related services.
This is a significant pivot from previous practise, where GCCs undertaking data‑intensive workloads had to navigate corporate tax liabilities and permanent‑establishment risks that varied by contract structure, revenue characterisation, and jurisdictional interpretations. By offering clarity and longevity, the Budget reduces legal and investment risk for long‑term commitments by global cloud providers and the GCCs that depend on them.
Second, the Budget rationalises India’s safe harbour and transfer pricing framework, particularly for IT and digital service exports. The safe harbour threshold for IT services has been raised, and uniform margins have been introduced, simplifying compliance and reducing the scope for disputed assessments. Historically, transfer pricing uncertainty has been a thorn in the side of global GCC operations, where intercompany charges for services and cost‑sharing arrangements are essential features. The Budget’s reforms respond directly to industry demand for predictability and rule‑based outcomes—a hallmark of mature global investment regimes.
For a lawyer advising multinationals on structuring and scaling GCCs, these two changes matter because they reduce the tail risk of contentious tax positions and create clearer expectations about how India treats capital‑intensive, high‑growth revenue streams. In sectors like AI and cloud, where commercial models evolve rapidly, legal certainty is often as critical as market access itself.
Beyond taxation and transfer pricing, Budget 2026 further strengthens India’s GCC landscape by deepening strategic infrastructure commitments. Capital expenditure has been raised substantially, continuing the policy trajectory of prioritising urban, digital, and technology‑focused infrastructure. For GCC site selection, physical and digital infrastructure certainty is a key competitiveness factor; it reduces operational risk and enhances workforce mobility and quality of life.
Another noteworthy dimension is the Government’s focus on semiconductor supply chain development and data sovereignty architecture. Budget announcements around India Semiconductor Mission 2.0 signal a broader ecosystem play—building not just services capability, but also hardware, design, and materials expertise domestically. For GCCs that increasingly integrate with hardware and embedded software functions, this creates adjacency value and strengthens India’s positioning along the full technology value chain. In a global environment where supply chain resilience and data localisation have become strategic priorities, India’s dual focus on compute and chip capability resonates with global boards seeking diversified hubs.
These infrastructure and technology incentives have a practical spill‑over into legal and contractual frameworks that matter for GCCs. Take, for example, cross‑border data flows and compliance with data protection norms. As India’s Digital Personal Data Protection Act and other data‑governance rules take firmer shape, GCCs are being asked to demonstrate compliance, accountability, and secure processing standards. The conjunction of tax incentives for data centre investment with a strengthening regulatory environment makes India an attractive jurisdiction for processing global services that are both technically complex and legally sensitive.
The Budget’s reforms also align with efforts to expand India’s role in global financial services, notably through extended incentives for hubs like GIFT City (Gujarat International Finance Tec‑City). Tax holiday extensions enhance its appeal as a financial and structuring node that can support treasury, global business services, and financing activities aligned with GCC mandates. For Indian GCCs that coordinate funding, risk hedging, and cross‑border contracting, having a favourable financial centre within the same policy ecosystem amplifies India’s value proposition.
Importantly, Budget 2026 also takes steps to encourage global expert mobility—a factor that has implications for legal residency, tax status, and employment compliance for international professionals embedded within Indian GCCs. The policy emphasis on facilitating talent inflows reflects a recognition that capability leadership depends not just on local skills, but on global expertise integration.
Taken together, these changes represent a coherent strategy to move GCC investment upstream. Whereas before the Budget India was winning cost and talent arbitrage, now it is actively bidding for global digital infrastructure, regulated capability hubs, and long‑duration enterprise functions.
From a legal‑strategic standpoint, Budget 2026 helps reconcile two often‑competing forces in global investment decisions: the desire for high capability at low friction, and the need for policy and legal certainty over decades, not quarters. By providing predictable frameworks and aligning tax policy with infrastructure priorities, India has strengthened its GCC proposition materially.
In the global competition for sophisticated services work, India has long had the talent and cost advantages. What Budget 2026 does is provide the policy scaffolding that allows these advantages to convert into deeper, higher‑value, and longer‑tenured capability commitments—making India a compelling choice for GCCs not just in execution, but in leadership of the global services agenda.
This article is authored by Vishwang Desai, Managing Partner, Desai & Diwanji.
