What are Global Capability Centres?
Global Capability Centres (GCCs) are offshore facilities set up by multinational corporations (MNCs) to manage a variety of business functions and processes for their parent organisations. These centres, originally focused on cost-driven back-office operations, have transitioned into strategic units driving innovation, research, and high-value capabilities. Recognising their significance, the Indian government is formulating a new umbrella policy aimed at attracting more GCCs, particularly in tier-2 and tier-3 cities, to ensure widespread economic benefits. GCCs can range in size from small focused teams to multi-dimensional large-scale organizations. Today, GCCs in India have evolved from being just a cost arbitrage option to owning entire product lines, delivering cutting-edge innovation in business-critical areas.
Key Legal and Regulatory Frameworks for Establishing a GCC in India
A foreign company setting up a GCC in India must comply with various central and state-level laws. This includes corporate laws on the type of legal entity, contract laws governing internal and external relationships, and sector-specific regulations. Legal risks can also arise due to differences in legal positions across jurisdictions on issues like permanent establishment, data privacy, and employee-related matters.
1.Corporate Structuring and Commercial Laws
A foreign entity must first choose the form of legal entity for its GCC in India, such as a company, joint venture, office, partnership, or limited liability partnership. It also needs to select the GCC’s structural model. This can be a DIY Model where the foreign company retains full control or a BOT Model where a third-party sets up and operates the centre before transferring control to the foreign company. If the GCC is incorporated under the Companies Act, 2013, it must comply with statutory provisions such as board composition, directors’ duties, company policies, charter documents, and routine/event-based filings with the Registrar of Companies.
2. Choosing Strategic Locations
There is no specific central law for governing all GCCs, but they may be regulated if set up in Special Economic Zones (SEZs) or International Financial Services Centres (IFSCs). The SEZ Act, 2005 governs units in SEZs, and the International Financial Services Authority (Global In-House Centres) Regulations, 2020 apply to GICs in IFSCs. These zones offer fiscal and non-fiscal benefits such as tax incentives, labour law relaxations, and simplified approval procedures. Popular GCC locations include Bengaluru, Hyderabad, Gurugram, Mumbai, Delhi-NCR, and GIFT City, which offer access to a large and skilled workforce. Some state-specific incentives may also apply based on local policies.
3.Employment and Hiring
All employees working for the GCC in India are governed by Indian labour and employment laws, regardless of their nationality. The GCC must follow regulations related to working hours, wages, benefits, employment contracts, termination procedures, and workplace safety. It is also required to establish policies to prevent sexual harassment and redress workplace grievances in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Hiring foreign nationals requires immigration compliance, including obtaining appropriate employment visas and registering with the Foreigners Regional Registration Office (FRRO).
4.Intellectual Property, Data, and Technology
The GCC’s operations may involve the creation, sharing, and use of intellectual property and data. Legal agreements must clearly outline ownership, licensing rights, and permitted use of IP between the foreign entity and its Indian GCC. Data handling must comply with India’s new Digital Personal Data Protection Act, 2023, especially regarding consent, storage, processing, and cross-border transfers. The GCC must also comply with the data protection laws of the foreign country where data originates if such data is processed in India. Technology transfer and software use should be addressed through robust contractual frameworks to protect proprietary rights.
5.Taxation
Tax planning is essential for avoiding double taxation and permanent establishment (PE) issues. The GCC should ensure compliance with Indian taxation laws such as the Income Tax Act, 1961 and GST laws. Transfer pricing regulations apply to cross-border intra-group transactions and must be documented properly. The Indian tax department may classify the GCC as a PE if it is found to be under the control and supervision of the foreign parent, especially if Indian employees directly report to the foreign entity. Reporting lines and decision-making structures must be designed to avoid such risks.
6.Preparing for Regulatory Changes
India’s legal and regulatory landscape is evolving, and GCCs must proactively track and prepare for future changes. Key legislative developments expected to impact operations include the upcoming Digital India Bill, Telecommunications Bill, and the implementation of the four labour codes: the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020. These codes aim to consolidate and streamline India’s labour law regime. The proposed Development of Enterprises and Service Hubs (DESH) Bill, 2022, which seeks to replace the SEZ Act, may introduce new thresholds or eligibility criteria that could impact GCCs operating in SEZs.
Policy Initiatives for GCC in India
- The Ministry of Electronics and Information Technology (MeitY) is planning to come up with a policy framework to provide fresh incentives for GCCs. These incentives aim to complement existing state-level policies and encourage GCCs to expand into smaller towns and cities.
- The focus is on creating dedicated office zones in areas where space constraints may otherwise limit large-scale operations. In such cases, the central government is considering incentives for establishing smaller GCCs dedicated to niche areas like healthcare and finance.
- Additionally, the GCC policy will emphasize long-term talent-building in frontier areas such as generative artificial intelligence (AI), healthcare, and financial intelligence.
- Several Indian states are proactively designing GCC-specific policies to attract investments. For instance:
- Karnataka: The state became the first to launch a dedicated GCC policy, rolling out a draft in September 2024 before the final version was released in November. The Karnataka GCC Policy: 2024-2029 aims to attract 500 new GCCs in the next five years, creating 350,000 jobs and generating an economic output of US$50 billion. Incentives include rental reimbursements, funding for innovation labs, and skilling expense reimbursements.
- Uttar Pradesh: The state’s GCC Policy 2024 is targeting over 1,000 GCCs and 500,000 jobs, offering fiscal incentives such as 100 percent stamp duty exemptions and payroll subsidies.
- Maharashtra: Known for its robust data connectivity and reliable infrastructure, Maharashtra is actively engaging with stakeholders to develop its own GCC policy, focusing on investments in technology parks and Special Economic Zones.
Future Outlook (2025) & Nano GCCs
- India’s Global Capability Centres (GCCs) landscape is on track to grow to over 2,100 centres by 2030, with the market size projected to cross ₹8.76 lakh crore (approximately US$100 billion). The national framework announced in the Union Budget for FY26 is expected to further boost the sector’s momentum, particularly in Tier II and Tier III cities, by encouraging development in emerging skill areas and supporting infrastructure growth.
- India’s Global Capability Centres (GCCs) are expanding with a strong regional presence, led by Bengaluru, which alone hosts 875 centres accounting for 30% of the national total followed by Delhi NCR with 465 units (15.6%) and Mumbai with 365 units (12.2%) as of FY2024. Other key hubs such as Pune, Hyderabad, and Chennai contribute over 34% collectively to the country’s GCC footprint. Industry-wise, IT/ITeS continues to dominate the sector with a 46% share in FY 23-24, followed by BFSI at 19%, industrial manufacturing at 13%, and consulting at 10%. Looking ahead, the next five years are expected to see robust hiring and expansion in IT and Telecom (27%), BFSI (20%), and government services (17%). India’s GCCs are firmly on an accelerated growth trajectory, evolving into global centres for innovation and strategic functions.
- In 2026, more than 70% of GCCs are expected to embed artificial intelligence (AI) capabilities into their operations. This includes the adoption of machine learning for advanced analytics, AI-powered customer service platforms, and the integration of AI into cybersecurity training.
- Simultaneously, the rise of “nano GCCs”, compact, agile centres located in tier-2 and tier-3 cities is gaining popularity. Their demand is projected to grow by 15–20% by 2025 and further by 25–30% in subsequent years. These cities offer strategic advantages such as lower living costs, improved quality of life, reduced pressure on urban infrastructure, and access to untapped talent pools. Nano GCCs typically focus on delivering specialized services and innovation at a smaller scale, supporting decentralization and regional workforce development. Job demand in these cities is expected to grow by 35–40% over the next two years.
