The Indian government’s recent removal of the controversial “intermediary service” clause marks a significant policy shift for the IT and Global Capability Centres (GCCs) industry. This regulatory change unlocks critical export benefits, improving India’s competitiveness in the global services sector.
Key Highlights
What Changed?
- Earlier, the intermediary clause imposed restrictions on companies earning revenue by facilitating services between clients and service providers, creating ambiguity and limiting export incentives.
- Now, its removal clarifies that Global Capability Centres (GCCs) and IT service providers can fully avail of export benefits under India’s export promotion schemes, boosting cost competitiveness.
Benefits for GCCs and IT Services
- Improved access to export incentives such as duty credits and tax benefits.
- Clearer regulatory framework, reducing compliance ambiguity for businesses.
- Greater encouragement for large-scale GCC investments, boosting employment and digital innovation.
Industry Impact
- GCCs, which serve as offshore innovation and service centers for multinational firms, will now find India more attractive as an investment destination.
- IT service providers can focus more on value-added services without regulatory bottlenecks.
Strategic Implications
- Global Competitiveness: Strengthens India’s position as a preferred location for GCCs and IT services in a highly competitive global landscape.
- Economic Growth: Encourages foreign investment and increases India’s share in the global technology and services market.
- Job Creation: Anticipated boost in employment opportunities as GCCs expand their footprint.
Conclusion
The removal of the intermediary service clause is a major win for India’s IT and GCC sector, streamlining export incentives and providing a clearer roadmap for growth. With this policy shift, India strengthens its role as a global hub for technology services, innovation, and talent development.
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