India’s Global Capability Centers (GCCs) are on a strong growth trajectory, but regulatory challenges like the Safe Harbour Regime (SHR) are creating roadblocks, according to industry experts. While India remains a preferred destination for MNCs setting up GCCs, taxation policies and transfer pricing regulations under SHR are causing concerns
What is the Safe Harbour Regime?
The Safe Harbour Regime was introduced to provide certainty in transfer pricing for multinational companies. However, experts argue that the current SHR framework results in higher tax rates and compliance complexities, discouraging GCC expansion in India
Key Challenges for GCCs
- Unfavorable Pricing Margins: Many GCCs find SHR margins too high compared to industry benchmarks
- Reduced Global Competitiveness: Stringent taxation policies could push MNCs to explore alternative locations
- Lack of Flexibility: The one-size-fits-all approach does not align with the diverse operating models of GCCs
The Way Forward
Industry leaders are calling for SHR revisions to align with global best practices, making India a more attractive GCC hub. A balanced approach can ensure regulatory compliance while supporting the rapid expansion of GCCs
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