IT sector welcomes Budget's GCC and tax proposals

The Union Budget provided a significant boost to the information technology (IT) industry, especially to the global capability centres (GCCs), which are expected to attract further investment.

The Budget also offered much-needed clarity on the taxation front, especially with regard to safe harbour rules and transfer pricing.

Union Finance Minister Nirmala Sitharaman, presenting Union Budget, said, “A national framework will be formulated as guidance to states for promoting Global Capability Centres in emerging Tier II cities. This will suggest measures for enhancing availability of talent and infrastructure, building-byelaw reforms, and mechanisms for collaboration with industry.”

Indian IT industry’s trade body Nasscom, in its reaction to the Budget, said, “The budget has laid a sharp focus on enhancing ease of doing business for companies. This is extremely crucial for India to create its global competitiveness. Measures such as a national guidance framework to help states promote and scale up GCCs is a significant step towards fostering sustainable growth in these regions.”

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The Economic Survey also highlighted the importance and growth of GCCs in India. The number of GCCs in India has grown from approximately 1,430 in FY19 to over 1,700 in FY24, employing nearly 1.9 million professionals.

“With 80% of global firms yet to establish GCCs in India, this initiative unlocks tremendous potential for transforming India's attractiveness as the global GCC capital, while creating millions of skilled jobs across the country's emerging urban centers,” said ANSR CEO Lalit Ahuja.

“The government's initiative to formulate a national framework for Global Capability Centres (GCCs) in emerging Tier 2 cities is a significant step forward. Cities like Jaipur, Vadodara, Coimbatore, and Kochi are quickly becoming popular alternatives to metro cities, with GCC leaders increasingly considering these locations for expansion. The framework will provide guidance to states on enhancing talent availability, improving infrastructure, and fostering collaboration with the industry,” said Arindam Sen, Partner and GCC sector leader (TMT), EY India.

The survey noted that leading organisations are centralising their tech ecosystems in India, which was evident in the aerospace, defence, and semiconductor sectors, where companies are advancing their engineering efforts to focus on next-generation platforms, products, and technologies.

Amit Kalra, Managing Director and Head Global Business Solutions, Swiss Re, said, "As India strengthens its status as the GCC capital, this move will drive high-value job creation, digital transformation, and economic growth, aligning with the country’s $5 trillion economy vision."

The Budget also provided clarity on transfer pricing and safe harbour rules. “To streamline the process of transfer pricing and to provide an alternative to yearly examination, I propose to introduce a scheme for determining arm's length price of international transactions for a block period of three years. This will be in line with global best practices,” said Sitharaman presenting Union Budget 2025.

Further, she said, “With a view to reduce litigation and provide certainty in international taxation, the scope of safe harbour rules is being expanded.”

Nasscom said the increase in the eligibility threshold for Safe Harbour Rules is a welcome step toward enhancing competitiveness and operational efficiency for GCCs in India. However, further clarity is needed to ensure its full impact in driving a more conducive and predictable business environment. The announcement on block assessment for three years on transfer pricing is a good step and will hopefully help ease assessment for past years, it said.

“The amendments proposed for improving the tax certainty for MNCs by bringing in block transfer pricing assessments for three years in one go and expansion of safe harbour provisions is likely to improve the foreign investors sentiment. Similarly, reduction of customs tariff structure from 15 to 8 and proposals to improve the ease of mergers and acquisitions will likely enhance pace of investor activity,” said Himanshu Sinha, Partner and Head of Tax Practice, Trilegal.

The proposals for the expansion of IITs and setting up a centre for artificial intelligence (AI) was also welcomed. IndiQube CEO Rishi Das said, “This forward-looking approach will further strengthen India’s position as a global hub for innovation and entrepreneurship."