Multinational companies operating in India increasingly rely on Global Capability Centres (GCCs) to handle critical functions such as data analytics, IT and IT-enabled services, compliance, and research and development for their global operations. What began as cost-efficient back offices has now evolved into high-value, strategic hubs driving core business decisions.
With over 1,700 GCC units employing more than 1.9 million professionals as of early 2025, the sector has emerged as a key pillar of India’s technology and services ecosystem. However, the growth of GCCs has long been shaped by concerns around tax uncertainty, complex compliance requirements and prolonged disputes.
Addressing these challenges, the Union Budget 2026 has proposed significant changes to GCC taxation and regulatory norms, aiming to provide clarity, stability and a more uniform framework to attract long-term investment. Crucially, these reforms, alongside other favourable factors, have opened up a new opportunity for eastern states such as Odisha, West Bengal, Jharkhand and the North-East to emerge as credible GCC destinations, potentially reshaping their role in India’s technology growth story.
2026 Union Budget's key takeaways
One of the most consequential announcements in the Budget is the consolidation of multiple service categories, including software development services, IT-enabled services (ITES), knowledge process outsourcing, and contract R&D under a single head of “Information Technology Services”, with a uniform safe harbour margin of 15.5%. Safe harbour is essentially a comfort provision; if a company meets certain predefined margins, its pricing is not challenged by the tax authorities. Historically, it is noticed that transfer pricing disputes in India have often revolved around the classification of services.
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The same GCC activity could be characterised differently by taxpayers and tax authorities, which leads to prolonged litigation. Merging these interconnected services into a single category would result in a reduction of interpretational ambiguity. For GCCs, this simplifies the structure, documentation, and defence of their service offerings. The timing of this reform is important, particularly with the new labour codes coming into force, as GCCs are already re-examining operating models, headcount structures, and compliance frameworks. The impact is not merely legal; it is operational.
The increase in the safe harbour threshold from INR 300 crore to INR 2,000 crore also stands to be equally important. Safe harbour was largely a tool for smaller captive units until now. Large and mature GCCs, often employing thousands and delivering mission-critical functions, were either excluded or exposed to audit risk. The revised threshold brings these larger entities within the safe harbour regime and makes India far more attractive for scale expansion rather than just for pilot operations.
A stable transfer pricing framework reduces the perceived risk of setting up in newer geographies. The proposal to fast-track unilateral Advance Pricing Agreements (APAs) for IT services, with a target timeline of two years (extendable by six months), addresses another long-standing concern. Traditionally, APAs for GCCs could take three to five years, involving extensive site visits and detailed operational scrutiny.
While APAs offered certainty, the time and effort involved deterred many companies. A shorter and more predictable APA timeline allows multinational groups to align their tax certainty with the business planning cycles of GCCs. For GCCs in emerging regions, this is crucial as new locations often face internal scrutiny from headquarters around governance and compliance risk.
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Further, perhaps the most forward-looking announcement is the 20-year tax holiday for foreign companies providing global cloud services using Indian data centres. While this measure directly targets hyperscalers and cloud service providers, the indirect impact on GCCs is substantial. Modern GCCs, especially the ones working on Artificial Intelligence, data engineering, cybersecurity, and platform development, are dependent on robust, low-latency, and resilient cloud infrastructure.
A long-term tax holiday until the year 2047 signals policy stability, which is immensely valued by infrastructure investors. This proposal is coupled with the enactment of the Digital Personal Data Protection (DPDP) Act, 2023, read with the DPDP Rules, 2025, which enhance the regulatory landscape for the collection and processing of personal data that is widely collected in the IT or IT- enabled service sector.
Eastern India advantage
As data centres keep expanding beyond traditional hubs, Eastern India stands to benefit. The state of Odisha, for instance, has already positioned itself as an emerging data centre destination, leveraging its reliable power availability, lower land costs, and proximity to submarine cable landing stations on the Eastern Coast. The Odisha Government’s AI Playbook, Data Centre Policy, combined with its broader IT Policy, offers capital subsidies, power tariff incentives, and land support- elements that align perfectly with the Budget’s long-horizon approach.
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Cities such as Bhubaneswar and Kolkata are increasingly emerging as quiet strengths in India’s GCC landscape, producing a steady pipeline of engineering, analytics and management talent at costs lower than tier-1 metros. Lower attrition rates and stronger employee loyalty add to their appeal, key factors for GCCs handling sensitive intellectual property and long-term, high-value projects. Odisha’s push on skill development through industry partnerships, combined with West Bengal’s large pool of STEM graduates, has created a solid base for sustained GCC expansion. The presence of premier institutions like IIT Bhubaneswar, NIT Rourkela and IIT Kharagpur, along with multiple central universities, further strengthens the regional ecosystem.
West Bengal through the lens of the budget
West Bengal, in particular, has been sharpening its digital focus under its IT and Electronics Policy, with renewed attention on New Town Rajarhat as a technology hub. Kolkata already hosts GCCs and large delivery centres for global banks, IT services firms and analytics companies. With improved cloud infrastructure and greater policy certainty, these centres have the potential to move up the value chain from routine processing to advanced analytics and AI-driven work.
Eastern India offers a distinct dual advantage: access to urban infrastructure, security, social life and professional ecosystems comparable to major metros such as Delhi and Maharashtra, but at a significantly lower cost of living. This balance makes the region attractive not just for cost efficiency, but for long-term talent retention.
The Union Budget 2026 reinforces India’s intent to remain a preferred GCC destination by addressing long-standing concerns around transfer pricing certainty, dispute resolution timelines and digital infrastructure. For GCCs, these reforms act as practical enablers rather than abstract policy promises. With effective coordination between central reforms and state-level execution, India’s GCC story, especially in the eastern states, could enter a decisive new phase of growth.
About the Author:
Sucharita Basu is the Founding and Managing Partner at AQUILAW.
