Global capability centres (“GCCs”) originated as offshore global in-house centres (“GICs”) initially within the Indian banking sector, primarily aimed at reducing costs and providing operational support to the service offerings of their foreign entity (“Foreign Entity”). India has emerged as a preferred destination for these centres due to its skilled workforce and cost-effective operations. Between financial year 2018-19 and financial year 2023-24, India has witnessed the establishment of over 400 new GCCs and more than 1,100 new centres, bringing the total number of GCCs to over 1,700.[1]
For any Foreign Entity considering setting up a GCC in India, it is essential to conduct a thorough structuring analysis and assess its strategic position prior to making a proposal. Since altering the structure and operating model of a GCC post-incorporation is often challenging and impractical, understanding the available options and their implications upfront is crucial.
Distinguishing GCCs from GICs
At the outset, the Foreign Entity must determine whether it intends to establish a GCC or a GIC. Although the terms GCC and GIC are often used interchangeably to describe capacity centres of multinational corporations (MNCs), only specific types of these centres qualify as a ‘GIC’ as per the International Financial Services Centres Authority (Global In-House Centres) Regulations, 2020 (“GIC Regulations”). Any unit that meets the definition of a GIC, regardless of its corporate structure, is required to comply with the GIC Regulations.[2]
Strategic Structuring of a GCC
For a Foreign Entity to set up a GCC in India and also employ individuals, it must first establish a ‘place of business’ in India, in the form of a legal entity recognised under Indian laws.[3] For this, the Foreign Entity can choose from many different options when structuring its GCC in India, such as a wholly owned subsidiary (“WOS”), a joint venture company (“JV”), a branch office (“BO”), or a limited liability partnership (“LLP”). Each of these structures is governed by distinct legal and regulatory frameworks in India.
The following are certain key considerations for each of the above-mentioned structures.
- Legal Oversight:
- WOS and JV are regulated by the Ministry of Corporate Affairs (“MCA”) and the Registrar of Companies (“RoC”) under the Companies Act, 2013.
- LLPs are governed by the MCA and RoC under the Limited Liability Partnership Act, 2008.
- BOs are regulated by the Reserve Bank of India (RBI), RoC, and authorized dealer banks under the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016.
- Cost of Setup:
- WOS and JV require payment of registration and stamp duty based on authorized capital, though private companies are exempt from minimum paid-up capital requirements.
- LLPs involve nominal filing fees and no minimum capital requirement for incorporation.
- BOs also require nominal registration fees but must demonstrate a profitable track record over the past five years in the home country and a net worth of at least US$ 1,00,000.
- Governance Requirements:
- WOS and JV must have at least 2 directors, including 1 resident Indian director, and between 2 to 200 members (excluding employees) for a private limited company.
- LLPs must have a minimum of 2 designated partners, with at least 1 being a resident Indian, and no upper limit on partners.
- BOs have no statutory requirement for directors, members, or partners.
- Meeting Requirements:
- WOS and JV are required to hold 4 board meetings annually (1 every 120 days) and 1 shareholders’ meeting per financial year.
- LLPs are not subject to statutory meeting requirements or mandatory record-keeping of minutes.
- BOs are not required to hold formal meetings.
Strategic Modelling of a GCC
Although the decision to choose the most appropriate model is to be made on a case-by-case basis, it is crucial to first understand the several potential structures and models that the Foreign Entity can consider before setting up its GCC. The key models that the Foreign Entity can consider are:
- Do-it-yourself model (“DIY Model”): Under this model, the Foreign Entity independently sets up and operates the GCC, retaining full ownership and control. Only specialized tasks requiring local expertise are outsourced.
- Build-operate-transfer model (“BOT Model”): Under this arrangement, a third-party service provider sets up and initially operates the GCC. Once the unit becomes self-sustaining, ownership and control are transferred to the Foreign Entity, along with compliance responsibilities.
- Hybrid BOT Models: Apart from the DIY and the BOT Models, the Foreign Entity may also adopt variants of the BOT Model, which are: (a) the joint venture model, in which the entity (or the service provider) building the GCC retains a minority equity interest even after its ‘transfer’ to the Foreign Entity; and (b) the virtual captive model, in which the GCC has only a virtual presence, i.e. to solely provide IT and business services to the Foreign Entity while being managed by a third-party service provider until the ‘transfer’, post which it will likely expand its service offerings.
Additional Considerations for Establishing and Operating a GCC in India
Setting up a GCC in India involves navigating several strategic, legal, and operational dimensions beyond entity structuring.
Strategic location
While no overarching legislation governs GCCs, those established in Special Economic Zones and International Financial Services Centres (IFSCs) are regulated under the Special Economic Zones Act, 2005 (“SEZ Act”) and the GIC Regulations, respectively. These zones offer both fiscal (e.g., tax breaks, labour law relaxations) and non-fiscal (e.g., simplified approvals) benefits.
Employment and resourcing
Indian labour laws apply to all employees working at the GCC, regardless of nationality. Given the focus on tapping into India’s diverse talent pool, GCCs must ensure compliance with employment laws, including grievance redressal mechanisms.
Intellectual property, data, and technology
GCCs must manage IP, data, and technology in line with Indian and foreign laws. This includes structuring intra-group IP and data arrangements, ensuring IP protection, and complying with the Digital Personal Data Protection Act, 2023 (once effective), especially for cross-border data transfers.
Taxation
Tax planning is critical, particularly around transfer pricing, GST, and employee-related taxes. Foreign entities must also avoid triggering “permanent establishment” status, which could lead to additional tax liabilities.
Regulatory Preparedness
GCCs must stay ahead of upcoming reforms, including the Digital India Bill, Telecommunications Bill, four new labour codes, and the Development of Enterprises and Service Hubs (DESH) Bill, 2022, which may replace the SEZ Act and impact operations in SEZs.
Government Policies
India’s GCC landscape is undergoing rapid policy development at both the central and state levels. While a comprehensive national GCC policy is still in progress, the Ministry of Electronics and Information Technology is developing a framework to incentivise GCCs, with a focus on long-term talent development in emerging sectors such as artificial intelligence, healthcare, and financial intelligence.[4]
At the state level, several progressive policies are accelerating the GCC ecosystem. Karnataka has introduced the ‘Karnataka GCC Policy 2024–2029’, targeting the setup of 1,000 GCCs by 2029 and projecting an economic output of USD 50 billion.[5] Gujarat launched the ‘Gujarat GCC Policy (2025–2030)’ to position itself as a top GCC destination. It offers employment-linked incentives, electricity duty exemptions, and interest subsidies, enhanced by tax advantages in GIFT City.[6] Telangana has implemented several key initiatives to promote the growth of GCCs in the state. These include streamlining the regulatory framework, enhancing infrastructure, and launching proactive skill development programs.[7] Further, Uttar Pradesh has also introduced the ‘UP GCC Policy 2024’ to capitalise on the state’s strategic location, abundant skilled talent, and robust infrastructure.[8]
Conclusion
Drawing from the successes of the GCCs and their massive impact on the Indian economy, the Government of India has increasingly focused on driving reforms to facilitate ‘ease of doing business’ to encourage Foreign Entities to directly/indirectly expand their business operations in the country. GCCs have been in India for more than a decade and are a tried-and-tested model in India’s regulatory, commercial, and political environments.
However, Foreign Entities eyeing India to set up a GCC on account of the availability of relatively inexpensive and skilled talent must also take into account the dynamic regulatory landscape governing the same. These regulations can play a significant role in determining the ultimate success of the Foreign Entity’s businesses (through the contribution by its GCC).
States like Karnataka, Telangana, and Uttar Pradesh have emerged as key enablers in this journey by proactively launching state-specific GCC policies, streamlining regulatory frameworks, and offering targeted incentives to attract and sustain global operations. These coordinated efforts reflect India’s ambition to become a global GCC powerhouse by driving innovation, employment, and sustainable economic growth through policy support and talent development.
References
[1] NASSCOM, GCC Playbook, Telangana’s Blueprint for Growth, November 2024 (accessible here). [2] Regulation 2(1)(e), International Financial Services Centres Authority (Global In-House Centres) Regulations, 2020. [3] Regulation 3 of the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 stipulates that “no person resident outside India shall without prior approval of the Reserve Bank open in India a branch office or a liaison office or a project office or any other place of business by whatever name called except as laid down in these Regulations.” [4] MeitY forms panel to create national framework for GCCs - The Economic Times [5] Department of Information Technology, Karnataka Global Capability Center (GCC) Policy- 2024 (accessible here). [6] Department of Science & Technology, Government of Gujarat (accessible here). [7] The New Indian Express, From cultural cradle to global innovation hub: How Hyderabad is leading India’s GCC revolution (accessible here). [8] Invest UP, Government of Uttar Pradesh (accessible here).
