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Safe Harbour in Taxation: Serving its Intended Purpose for India’s GCCs
Safe Harbour in Taxation: Serving its Intended Purpose for India’s GCCs

September 2, 2025

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India’s technology exports are anchored not only by IT and IT enabled services firms serving global clients, but also by the rapidly scaling base of Global Capability Centres (GCCs). By FY2024, more than 1,700 GCCs in India generated revenue of USD 64.6 billion and employed 1.9 million professionals. As India positions itself as the preferred global hub for digital delivery, a tax framework that provides certainty and predictability becomes indispensable.

One of the most important tools in this respect is the Safe Harbour regime in transfer pricing. Originally introduced in 2013, Safe Harbour was designed to provide a simplified route for routine intra-group service providers to obtain certainty, without the prolonged litigation often associated with transfer pricing audits. Over time, however, eligibility thresholds and prescribed margins have fallen out of sync with industry realities.

Most GCCs operate on a cost-plus model, bear limited risks, and do not own or exploit intangibles locally. In principle, they are the best-suited candidates for Safe Harbour. Yet, many centres are excluded due to turnover thresholds and high presumptive margins that sit above observed outcomes in the industry. As a result, uptake has remained limited, despite GCCs being exactly the kind of low-risk taxpayers the regime was meant to support.

Encouragingly, recent policy signals point towards reform. In the last two Union Budgets, the Finance Minister announced measures to expand and simplify Safe Harbour. In March 2025, the Central Board of Direct Taxes raised the ceiling from ₹200 crore to ₹300 crore. A Working Group has since been tasked with reviewing thresholds, margins, and processes. This creates a timely opportunity to recalibrate Safe Harbour in a way that balances revenue protection with ease of doing business.

Our latest paper sets out practical reform options, including:

  • Realigning margins to the 14–15 per cent range observed across the industry.
  • Simplifying service categories, reducing disputes arising from overlaps between IT, ITES, KPO, and R&D.
  • Removing misaligned proxies such as turnover thresholds and employee-cost ratios that do not correlate with profitability.
  • Enhancing predictability through multi-year elections, digitised compliance, and voluntary opt-in mechanisms.

Together, these measures can strengthen Safe Harbour as a credible and widely used option, especially for GCCs. By providing certainty for routine, low-risk service providers, while leaving APAs and regular assessment available for complex cases, India can foster a more stable and competitive environment for global investors.

As with GST and SEZ reforms discussed earlier in this series, aligning Safe Harbour with industry realities is central to reducing disputes, enhancing predictability, and sustaining India’s export growth. This is one part of a broader ease of doing business agenda for the technology sector. In the coming days, we will spotlight additional themes, including more areas for GST reforms and also spotlight important reform agenda on the labour frameworks.

Do read the full paper attached with this blog.


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Nasscom-PP-TAX-03-2025_Ease-of-Doing-Business_Taxation-Paper-III_Safe-Harbour-GCC-Exports.pdf

ashish.aggarwal



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