Global Capability Centre (GCCs) aka captive service provider aka offshore development centers, are offshore units established by multinational corporations (MNCs) to perform a variety of business operations. These operations include IT, finance, customer service, HR, and product development. GCCs are also known as the in-house tech outposts of MNCs. GCCs leverage specialized talent, operational efficiencies, and cost arbitrage in various locations worldwide.
- Number of GCCs: Current estimates suggest there are over 1,600 to 1,800 GCCs in India. Reports predict a rise to around 2,400-2,550 by 2030.
- Employment: 1.66 million is a good ballpark figure, but with the growth in GCCs, the number of people employed is also expected to rise. Projections indicate it could reach over 4.5 million by 2030.
GCCs have become a key driver of India’s economic growth. The Indian government has set up special economic zones (SEZs) where companies can set up their GCCs and have access to various tax incentives and other benefits. The cost of operating a captive center in India is much lower than in developed countries, due to lower salaries, lower real estate costs, and favourable exchange rates.
This passage highlights the challenges faced by Global Capability Centres (GCCs)* in India due to a rapidly changing regulatory landscape, particularly with the rise of artificial intelligence (GenAI). The Nasscom-KPMG survey report sheds light on these complexities:
Top Regulatory Priorities:
Transfer Pricing (81% of respondents): This refers to the pricing of transactions between related companies, and ensuring these prices are set at arm’s length (similar to what unrelated parties would charge).
- SEZ (Special Economic Zone) & STPI Regulations (67% of respondents): These govern the operation of special economic zones and Software Technology Parks of India, offering benefits like tax breaks. Understanding these regulations is crucial for GCCs operating in these zones.
- Labour Laws (60% of respondents): Keeping up with evolving labour laws, including minimum wages, working hours, and employee benefits, is a key priority.
Additional Regulatory Considerations:
- Corporate Tax: Changes in corporate tax rates and structures can impact GCC operations.
- DPDPA (Data Protection Act): The upcoming Data Protection Act will have a significant impact on how GCCs handle personal data.
- FEMA (Foreign Exchange Management Act): Regulations governing foreign exchange transactions are important for GCCs with international operations.
Navigating Complexity:
- The report suggests that GCCs need to develop a comprehensive understanding of the Indian regulatory environment. This includes internal mapping of regulations, risk assessment strategies, and compliance procedures for audits and data privacy.
- The author acknowledges that while India’s regulatory environment is generally friendly, complexities arise due to the specific frameworks and processes followed by individual GCCs.
- He emphasizes that the definition of “concentration” (overdependence on India for operations) is subjective and depends on factors like the size and nature of a GCC’s operations.
- The Nasscom-KPMG survey underscores the importance of continuous compliance efforts for GCCs in India. Staying updated on evolving regulations, coupled with robust internal frameworks, helps these centres navigate the complexities of operating in a dynamic environment.
BCL India over a span of last 13 years, has been handling 250+ GCC’s, helping them in all parameters reducing the complexities mentioned above. We are your one-stop solution for comprehensive support. Focus on your core business while BCL India takes care of your regulatory compliance. Don’t let legal hurdles hinder your GCC’s success in India.
Our team of experienced professionals provides a wide range of services to ensure your GCC adheres to all relevant regulations, including:
- Regulatory Gap Analysis: We identify potential compliance risks and develop a customized strategy for your GCC.
- Compliance Management: We guide you through the intricacies of [e.g., data privacy, labour laws, tax regulations, STPI etc.] and ensure ongoing adherence.
- Expert Guidance: Our team provides clear and concise advice to help you navigate complex regulations with confidence. We also offer support if you encounter any legal challenges related to compliance.
- Proactive Approach: We stay up-to-date on the latest regulatory changes and keep you informed to avoid potential pitfalls.
