§ 1
What makes a GCC different from an ordinary subsidiary
A GCC earns almost all its revenue from group companies. That makes transfer pricing the main tax issue: the Indian entity must earn an arm's length return for the functions it performs, the assets it uses and the risks it bears. Most captives are characterised as low-risk service providers, remunerated at cost plus a markup that is benchmarked every year.
Its services are usually exports, which are zero-rated under GST when the conditions are met, so the GCC can export without paying GST under a letter of undertaking and claim refunds of input tax. Getting the contracts and invoicing right matters, because services classed as 'intermediary' have historically been taxed in India rather than treated as exports.
GCCs also hire quickly. Payroll must be set up under the four labour codes in force since November 2025, with provident fund, insurance, gratuity and state registrations ready before the first employee joins.
§ 2
The law that applies
| Companies Act, 2013 and FEMA, 1999 | Incorporation of the subsidiary and reporting of foreign investment. |
|---|---|
| Income-tax Act, 2025 (transfer pricing provisions and safe harbour rules) | Arm's length pricing of services to the group, documentation and safe harbour margins. |
| IGST Act, 2017 | Export of services, letter of undertaking and refunds; place of supply for intermediary services. |
| Code on Wages, Code on Social Security, Industrial Relations Code, OSH Code | Wage definitions, PF, ESI, gratuity, standing orders and working conditions. |
| State Shops and Establishments Acts | Registration of the office, working hours and night shifts for women employees. |
§ 3
Issues and how we solve them
The problems that most often hold up or complicate this work, and how we deal with each.
Issue 1
The parent wants a single global markup, but the Indian centre performs higher-value work.
Our approach
We carry out a functional analysis of what the centre actually does. If it is building intellectual property or taking decisions, a routine markup may not hold. We document the model, benchmark it, and consider safe harbour or an advance pricing agreement where certainty is worth the effort.
Issue 2
GST refunds on exports are stuck.
Our approach
We set up the LUT, align invoice dates with receipt of foreign currency, reconcile input tax credit to the GST portal each month and file refund claims with the export evidence in the format officers expect.
Issue 3
Senior people in India are effectively running the parent's business.
Our approach
Where Indian staff negotiate or conclude contracts for the parent, the parent may have a permanent establishment in India. We define authority limits in the intercompany agreement and job descriptions, and review them as the centre grows.
Issue 4
Headcount is growing faster than payroll compliance.
Our approach
We register the entity with EPFO, ESIC and the state authorities before the first hire, set up salary structures that work under the labour codes' wage definition, and run payroll with statutory filings every month.
§ 4
Process and timeline
- 1
Model
Weeks 1–2Agree functions, the pricing model and contracts between the parent and the GCC.
- 2
Incorporation
Weeks 2–8Incorporate the subsidiary, open bank accounts and report the investment.
Filing: SPICe+ · FC-GPR
- 3
Registrations
Weeks 6–10GST with LUT, shops and establishments, PF, ESI and professional tax.
- 4
First payroll
Weeks 8–12Salary structures, offer letters and first monthly payroll run.
- 5
Run
OngoingMonthly cost-plus invoicing, accounts, GST, TDS and annual TP documentation.
§ 5
Ongoing obligations
| Obligation | Basis | When |
|---|---|---|
| Monthly cost-plus invoice to the parent | Intercompany agreement | Monthly |
| Transfer pricing documentation and accountant's report | Income-tax Act, 2025 | Annually |
| GST returns and export refunds | CGST and IGST Acts | Monthly |
| PF, ESI and professional tax | Labour codes and state laws | Monthly |
§ 6
Our scope of work
Included
- Entity and pricing model
- Incorporation and FEMA reporting
- Intercompany service agreement review
- GST with LUT and refunds
- Payroll set-up under the labour codes
- Monthly accounts and invoicing
- Annual transfer pricing documentation
Not included (quoted separately)
- Real estate and recruitment
- Advance pricing agreement filings (quoted separately)
§ 7
Questions
Should a GCC be a subsidiary or a branch?
Almost always a subsidiary. It gives flexibility in activities, a lower tax rate and a clearer separation between the Indian team and the parent.
What markup does a GCC charge?
It depends on the functions performed. The markup is benchmarked against comparable independent companies each year, or set under the safe harbour rules where they apply.
Are a GCC's services to its parent exempt from GST?
They are zero-rated as exports of services when the conditions are met, including receipt of payment in convertible foreign exchange and the place of supply being outside India.
Prepared by CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375, SU and Company · Last reviewed 4 November 2026. General information only, based on the law as it stood on that date; it is not advice for any particular case.