- A GCC is a wholly owned Indian subsidiary providing services to the group at cost plus a markup; from tax year 2026-27 the 15.5% IT-services safe harbour under Rules 86–102 of the Income-tax Rules, 2026 gives five years of transfer pricing certainty for centres up to ₹2,000 crore.
- Every GCC invoice touches five rulebooks — transfer pricing, the intercompany contract, GST (zero-rated export plus ITC refund), FEMA realisation and reporting, and, for anything paid back to the group, withholding tax.
- Permanent establishment containment is a design decision: the GCC must be a separately managed service provider, not the parent's department, especially after the Supreme Court's Hyatt decision.
- The annual cadence is fixed: Form 48 by 31 October, return by 30 November, FLA by 15 July, LUT before 1 April, monthly EDF and GST returns, quarterly refunds.
1. Entity and capital
A private limited company, 100% owned by the group entity that will contract for the services (not necessarily the ultimate parent — the entity that pays), under the automatic FDI route. Minimum two directors with one resident in India; a nominee shareholder for the second share. Capital sized for the first six to nine months of operating cost plus deposits, remitted and allotted within 60 days, FC-GPR within 30 days. Avoid parent loans at the outset — ECB rules and section 177 complicate what equity does simply. See setting up a subsidiary.
2. The operating model and transfer pricing
Decide, honestly, what the centre will be: a limited-risk service provider executing assigned work, or a centre that will own product decisions and IP. The former supports cost-plus pricing and the safe harbour; the latter requires a different pricing model and attracts PE and IP-attribution scrutiny. For most GCCs in their first years the limited-risk model is both true and advisable. Price at cost plus the arm's length markup — for eligible IT services, 15.5% on operating expenses under the safe harbour, elected in Form 49 by 30 June following the first tax year, for a five-year block. Define the cost base and pass-throughs precisely; true-up at year end. Benchmark anything the safe harbour does not cover (shared-services functions, procurement, legal). Form 48 and the local file every year regardless. See safe harbour and markup.
3. The intercompany agreement
Signed before the first invoice, with the paying entity as counterparty, the limited-risk allocation stated, IP assigned to the principal, 30–60 day payment terms, invoicing within 30 days of month end, and a true-up clause. Board approval under section 188, stamped in India. See the checklist.
4. GST
The GCC's services to foreign group entities are exports under section 2(6) of the IGST Act (Circular 161/17/2021 confirms parent–subsidiary supplies qualify). File the LUT before the first invoice and each 1 April; invoice with the Rule 46 export endorsement; e-invoice if turnover exceeds ₹5 crore; claim refund of input tax credit quarterly under Rule 89(4). Services received from the group — management fees, software, cloud — are imports under reverse charge, creditable. Decide early whether an SEZ unit is worthwhile: it offers upfront GST exemption on procurements and duty-free imports but brings its own compliance, lease constraints and the loss of the income-tax holiday for units set up after 2020 makes the case weaker than it was.
5. FEMA
Export proceeds realised within nine months of invoice; monthly Export Declaration Form from October 2026 (SOFTEX ends); correct purpose codes; FLA return by 15 July; FC-GPR for every capital infusion; Form OPI half-yearly if Indian employees receive parent-company shares. See realisation.
6. Withholding on what flows back
Anything the GCC pays the group — management fees, licence fees, recharges — is tested under section 393(2) and documented through Forms 145/146, with treaty relief on TRC, Form 41 and no-PE declaration. Keep inbound services in a separate agreement from the outbound services. See Forms 145/146.
7. People: ESOPs, secondees, visitors
Parent-company ESOPs for Indian staff are routine but carry perquisite tax on exercise (withheld by the Indian employer), Form OPI reporting, and a transfer pricing decision on whether the cost is recharged into the markup base. Parent employees seconded to India need a deliberate structure (who employs, who controls, who pays) because of service-PE, fees-for-technical-services and GST manpower-supply exposure. Count visiting days per person; under India–US, services to a related enterprise create a service PE without a day threshold, so the visiting team's role must be oversight of a contract counterparty, not running the centre.
8. PE containment
After Hyatt (2025), the parent's operational control over the Indian premises and staff is itself a PE risk. Governance should look like a customer–vendor relationship at the point of contact: the GCC's own managing director and leadership team, its own HR policies, the parent setting requirements and accepting deliverables under the agreement rather than directing individuals. Badges, email domains and org charts are evidence; so is who approves leave. See PE risk.
9. The annual cadence
| When | What |
|---|---|
| Before 1 April | LUT for the new year; pricing schedule and budget under the intercompany agreement |
| Monthly | Export invoices (within 30 days); EDF (within 30 days of month end); GSTR-1/3B; TDS deposits by the 7th; reverse-charge self-invoices |
| Quarterly | ITC refund application; TDS statements; margin review against target; advance tax |
| 30 June (year 2 of block) | Form 49 safe harbour election |
| 15 July | FLA return |
| 30 September | Audit; AGM; DIR-3 KYC |
| 31 October | Form 48; AOC-4 (30 days after AGM); MSME-1 |
| 29–30 November | Return of income; master file (Form 56); MGT-7 |
| 31 December | GSTR-9/9C; APR if the GCC itself holds ODI |
Frequently asked questions
What is the safe harbour margin for a GCC in India?
15.5% operating profit on operating expenses for eligible IT services (software development, ITeS, KPO, software-related contract R&D) with insignificant risk, under Rules 86–102 of the Income-tax Rules, 2026, for transactions up to ₹2,000 crore, elected in Form 49 for a five-year block.
Should a GCC be set up in an SEZ?
Only if the GST and customs savings on procurement outweigh the SEZ's lease, compliance and exit constraints. The income-tax holiday is not available to units set up after the 2020 sunset, which has weakened the case for most services GCCs.
Is GST charged on a GCC's services to its parent?
No. They are zero-rated exports under the LUT; the GCC claims a refund of input tax credit on its Indian purchases under Rule 89(4).
Can the parent's managers run the Indian centre directly?
They can set requirements and accept deliverables under the services agreement. Directing the Indian staff day to day and treating the premises as their own creates fixed-place PE risk, as the Hyatt judgment illustrates.
How are parent-company ESOPs for Indian GCC employees taxed?
As a perquisite on exercise (fair market value less exercise price), with the Indian employer withholding tax on salary; capital gains on later sale. The Indian company reports the shares in Form OPI half-yearly. Whether the ESOP cost enters the markup base depends on whether the parent recharges it.
What are the main annual deadlines?
LUT before 1 April; FLA by 15 July; Form 48 by 31 October; return and master file by 30 November; GSTR-9 by 31 December; Form 49 by 30 June after the first year of the safe harbour block; monthly EDF and GST returns; quarterly refunds and TDS statements.
Sources
Primary sources only. Statutory text is read from the official publication; where a provision has been renumbered, the pre-2026 reference is given alongside so older material can be reconciled.
- Income-tax Act, 2025 and Income-tax Rules, 2026 — Income Tax Department, Tax Laws & Rules
- CGST Act, IGST Act, CGST Rules and GST circulars — CBIC
- FEMA notifications — Reserve Bank of India
- RBI Master Directions — Reporting under FEMA; External Commercial Borrowings; Overseas Investment; Export of Goods and Services; LRS
- Companies Act, 2013 and rules — Ministry of Corporate Affairs
Last reviewed on 1 November 2026 by Suchit Jhunjhunwala, FCA, VMS Jhunjhunwala & Co. Law stated as at that date; the Income-tax Act, 2025 and Income-tax Rules, 2026 apply from 1 April 2026.
