How to structure your GCC in India for long-term success?
From wholly-owned subsidiaries to BOT models, here’s how global companies can choose the right structure for setting up GCCs in India.
India’s emergence as the world’s leading destination for Global Capability Centres (GCCs) is no accident. With a deep talent pool, cost advantages, and an improving regulatory landscape, global companies—from tech giants to banks and pharmaceutical firms—are establishing their offshore nerve centres here.
But the key to long-term success lies in how a GCC is structured legally and operationally. According to Nishith Desai Associates’ insights, the structure you choose impacts everything—from tax compliance and IP control to hiring flexibility and exit strategy.
Wholly-owned subsidiary: The most robust model
The most preferred model for GCCs in India is the wholly-owned subsidiary (WOS). In this setup, the foreign parent company incorporates a new legal entity in India under the Companies Act, 2013.
This structure offers maximum control, legal identity, and operational independence. It allows the GCC to enter into contracts, own property, and most importantly, protect and manage intellectual property created within the centre.
However, this model also comes with full responsibilities—tax compliance, governance reporting, transfer pricing regulations, and adherence to Indian employment laws. Companies that adopt this model typically have a long-term view and aim to evolve their GCCs into innovation and R&D hubs.
Branch or liaison office: Lower risk, limited scope
A branch office is a direct extension of the foreign company, regulated by the Reserve Bank of India. It can undertake revenue-generating activities but is subject to higher compliance and reporting obligations.
A liaison office, by contrast, is a more restricted model. It cannot undertake any commercial or revenue-generating activity in India—limited only to coordination, representation, and communication functions.
These structures are ideal for firms testing the Indian market, or those who want a low-commitment entry point. But they lack strategic depth for firms looking to scale rapidly or diversify operations.
Build-Operate-Transfer (BOT): A phased approach
A growing number of companies are entering India through Build-Operate-Transfer (BOT) models. In this approach, a third-party service provider sets up and runs the operations, and after a few years, the foreign company takes full ownership and control.
This model is appealing to firms new to India, offering speed, local expertise, and lower initial investment. However, it requires strong contractual frameworks to manage IP, talent continuity, and operational handover.
Legal and compliance essentials
Regardless of the model, firms must address a few critical elements:
- Transfer pricing: Inter-company transactions must meet arm’s-length standards under Indian tax law.
- IP ownership: All intellectual property created must have clear assignment clauses to avoid future disputes.
- Employment law: Labour laws differ by state, so location decisions have legal implications.
- Data and privacy: With India’s Digital Personal Data Protection Act now in effect, GCCs must ensure compliance while handling cross-border data transfers.