India has emerged as one of the top destinations for Global Capability Centers (GCCs). The sector has gone through significant growth, with a 14% increasein revenue in fiscal year 2025, contributing to 4.5% of India's GDP.
This expansion is driven by factors such as access to a skilled workforce, cost efficiencies, and supportive government policies. However, establishing a GCC in India involves various costs that need careful consideration.
In this blog, we will take you through a detailed breakdown of the costs associated with setting up a GCC in India and share insights on how to plan effectively for long-term success.
Key Takeaways
Setting up a Global Capability Center (GCC) in India offers businesses access to a skilled workforce, cost efficiencies, and a growing business ecosystem.
The cost of setting up a GCC is influenced by various factors such as the choice of legal structure, location, infrastructure, labor costs, and regulatory compliance.
Businesses can manage costs by taking advantage of government incentives, choosing the right location, optimizing real estate costs, and understanding India’s competitive labor rates.
Proper legal structure selection and compliance with India’s complex regulations are essential to avoid hidden costs and ensure smooth operations.
With the right strategies in place, businesses can set up a successful and cost-effective GCC in India that supports global operations while driving long-term growth.
What Is a GCC and Why India?
A Global Capability Center (GCC) is an operational facility set up by multinational companies to centralize and manage critical business functions such as technology development, finance, HR, customer service, and supply chain management in a foreign country. These centers act as hubs for innovation, cost optimization, and efficiency, handling functions that support the company’s global operations while reducing costs and improving business processes.
GCCs are increasingly playing a strategic role in driving growth, supporting global expansion, and enabling companies to apply global talent pools for core functions. While many countries offer outsourcing opportunities, India has become the top destination for setting up GCCs due to its numerous advantages.
Top 5 Reasons to Set Up a GCC in India
India has become a preferred location for GCC setups due to several compelling reasons, especially for businesses expanding from the US to India:
1. Talent Pool and Cost Efficiency: India showcases one of the largest and most diverse talent hubs in the world. With a highly skilled workforce in fields like IT, finance, customer support, and engineering, India offers significant advantages in terms of talent acquisition.
2. Growing Business Ecosystem: India has seen a boom in tech infrastructure, R&D initiatives, and business support services, allowing global organizations to run sophisticated operations with efficiency. India’s push towards becoming a hub for digital innovation and technologies, such as AI, machine learning, and cloud computing, has further strengthened its appeal as a GCC destination.
3. Strategic Location: India’s strategic location in South Asia allows businesses to extend their footprint across key markets in Asia and Middle East. It is an ideal gateway for companies aiming to tap into emerging markets or set up cross-border operations. India’s time zone advantage (GMT +5:30) also offers smooth 24/7 operations, ensuring continuous business cycles across regions.
4. Government Support and Incentives: India’s government offers attractive incentives to attract foreign direct investment (FDI), including tax holidays, special economic zones (SEZs), and smooth regulatory processes. These incentives, coupled with the country’s pro-business policies, have played a crucial role in positioning India as the global leader in hosting GCCs.
5. Infrastructure and Connectivity: India’s infrastructure includes world-class office spaces, reliable telecommunications, and transportation systems, which support the efficient setup and running of GCCs.
India’s combination of a large, cost-effective talent pool, strong technological infrastructure, favorable government policies, and strategic location makes it the preferred choice for establishing GCCs.
As we look into why India has emerged as the preferred location for GCCs, it’s important to understand the factors that make it so attractive. Let’s explore the key reasons behind India’s dominance in this space.
Factors Influencing the Cost of Setting Up a GCC in India
Understanding the factors influencing the cost of setting up a GCC in India is crucial for budgeting and planning. For businesses expanding from the US to India, these factors become even more critical. These can differ based on the type of GCC, location, scale, and the specific business needs of the company.
Here are the key elements that impact the overall cost of setting up a GCC in India:
1. Legal Structure and Entity Setup
Choosing the right legal structure for your GCC is one of the first and most important decisions. The legal entity setup determines the operational framework and the associated costs. The most common structures for a GCC in India include:
Private Limited Company (PLC): Offers the flexibility of limited liability and is suitable for businesses planning to engage in long-term operations. Setting up a PLC involves registration with the Ministry of Corporate Affairs (MCA) and compliance with local laws.
Limited Liability Partnership (LLP): A more flexible structure with fewer regulatory requirements, suitable for smaller operations or joint ventures.
Branch Office: Permits a foreign company to establish a presence in India for limited functions like marketing or research, with fewer compliance obligations.
Liaison Office: This structure offers minimal operational scope and cannot engage in revenue-generating activities, making it a cost-effective but limited option. Setting up a Liaison Office in India requires careful evaluation of compliance and approval processes. VJM Global helps you through each step, ensuring a compliant and well-structured business presence.
Each legal structure has different registration fees, tax obligations, and compliance requirements, which directly influence the setup costs.
2. Location of the GCC
India offers a variety of locations to set up your GCC, from Tier-1 cities to Tier-2 cities, and the cost of setting up operations can differ based on where you select to establish your center.
Tier-1 Cities (e.g., Mumbai, Bangalore, Delhi): These cities are business hubs with access to a skilled workforce and excellent infrastructure. However, they come with higher real estate costs, salaries, and operational expenses. For example, office rentals in these cities can be 30–40% higher compared to Tier-2 cities.
Tier-2 Cities (e.g., Pune, Chennai, Hyderabad): These cities offer lower operating costs, including cheaper office spaces, lower salaries, and more affordable infrastructure. Many businesses prefer these cities for their balance of cost and talent availability.
Choosing the right city involves balancing operational needs with cost considerations. Tier-1 cities may offer higher operational efficiency, while Tier-2 cities can be more cost-effective.
3. Infrastructure and Office Space
The cost of setting up office space, including facilities, technology, and operations, is a significant component of GCC setup expenses. Costs include:
Office Rent: Monthly rental costs for office spaces can range from INR 50,000 to INR 100,000 per seat in Tier-1 cities, while Tier-2 cities may offer lower rates ranging from INR 30,000 to INR 50,000 per seat.
IT Infrastructure: Establishing IT systems, purchasing hardware, and setting up a secure network infrastructure can incur costs between INR 5 to 15 lakhs, depending on the scale of operations and specific requirements.
Operational Setup: This includes office furniture, utilities, and administrative costs, which also add up to the overall setup cost.
These vary based on the scale of the GCC and the level of customization required in infrastructure and technology.
4. Human Resources and Recruitment
One of the most significant costs for any GCC is recruitment, employee compensation, and benefits. India offers a large talent pool, especially in sectors like IT, finance, customer service, and HR. However, the costs associated with hiring and retaining skilled talent depend on several factors:
Salaries: Employee salaries vary based on role, experience, and location. For example, mid-level IT professionals in Tier-1 cities can earn between INR 7–12 lakhs annually, while senior roles may command INR 20 lakhs or more.
Recruitment Costs: Recruiting talent can be a costly affair, especially for niche roles. The cost of hiring through recruitment firms, advertising job openings, and conducting interviews can be significant.
Employee Benefits: Indian labor laws require companies to provide benefits like Provident Fund (PF), Employees’ State Insurance (ESI), and Gratuity, which add to the employee cost. These costs can account for 10–15% of an employee's gross salary.
Human resources costs are an ongoing expense that should be factored into the overall GCC budget.
5. Legal and Regulatory Compliance
Complying with India’s legal and regulatory requirements adds to the cost of setting up a GCC. Businesses must register with multiple government agencies, including:
Ministry of Corporate Affairs (MCA): For setting up a Private Limited Company or LLP.
Reserve Bank of India (RBI): For foreign investment approvals (if applicable) and repatriation of profits.
Tax Registration: Businesses need to register for Goods and Services Tax (GST), Tax Deducted at Source (TDS), and obtain a Permanent Account Number (PAN) for tax purposes.
For U.S. organizations, understanding these factors and their impact is essential to choosing the right setup when expanding into India.
VJM Global offers three flexible models to match your GCC strategy:
DIY Model: Build your GCC independently with expert advisory, templates, and compliance toolkits.
BOT Model: Let VJM Global build, operate, and transfer your GCC once it’s stable and fully functional.
Hybrid BOT Model: Manage your core operations while VJM Global oversees legal, tax, and compliance excellence.
Select the model that fits your goals and start your GCC journey with VJM Global today.
Legal consultations, registration fees, and compliance audits can significantly add to initial costs. It is recommended to work with legal and financial experts to ensure that all filings and needs are met to avoid penalties or delays.
6. Government Incentives and Support
The Indian government offers various incentives for foreign investors, especially those setting up Special Economic Zones (SEZs). These benefits include:
Tax Exemptions: Many regions offer tax holidays for businesses operating in SEZs.
Financial Assistance: Companies can avail subsidies for setting up infrastructure and adopting technology.
Policy Support: The government provides policy frameworks that ease regulatory processes and offer funding support.
Having explored the factors that influence the cost of setting up a GCC, it’s now time to break down these costs in detail. Let’s take a closer look at what the full setup will involve financially.
Detailed Breakdown of GCC Setup Costs in India
Establishing a Global Capability Center (GCC) in India involves a multifaceted investment strategy, encompassing legal, infrastructural, human resource, and operational expenditures. Below is a comprehensive breakdown of the key cost components associated with setting up a GCC in India:
1. Legal and Regulatory Compliance
Establishing a legal entity in India is the foundational step. Costs include:
Incorporation Fees: Registering a Private Limited Company or Limited Liability Partnership (LLP) in India typically incurs costs ranging from ₹1 lakh to ₹5 lakh. This includes expenses for obtaining Digital Signature Certificates (DSC), Director Identification Numbers (DIN), and filing with the Ministry of Corporate Affairs (MCA).
Regulatory Approvals: If the GCC operates in a Special Economic Zone (SEZ), additional approvals from the Reserve Bank of India (RBI) and the Directorate General of Foreign Trade (DGFT) may be required, adding to the setup costs.
2. Infrastructure and Office Setup
Infrastructure costs are significant and vary based on location and scale:
Office Space Rental: Grade A office spaces in Tier-1 cities like Bengaluru, Hyderabad, and Pune can cost between ₹50 - ₹100 per square foot per month. For instance, a 50,000 sq. ft. office space could cost approximately ₹25 lakh to ₹50 lakh per month in rental expenses.
Fit-Out and Furnishing: Initial setup costs for office interiors, including furniture, lighting, and HVAC systems, can range from ₹50 lakh to ₹2 crore, depending on the scale and customization.
IT Infrastructure: Setting up IT systems, including servers, networking equipment, and software licenses, may require an investment of ₹1 crore to ₹5 crore, depending on the technological requirements.
3. Human Resources and Talent Acquisition
Labor costs in India are competitive, offering substantial savings compared to Western countries:
Salaries: The annual salary for a software engineer in India is approximately $15,000, significantly lower than the $100,000 in the U.S.
Recruitment Costs: Hiring specialized talent, onboarding, and training can incur costs between $20,000 and $100,000, depending on the GCC size and the complexity of roles.
Employee Benefits: Employers are required by law to contribute to employee benefits such as Provident Fund (PF), Employees’ State Insurance (ESI), and Gratuity, which can add an additional 10-15% to employee salaries annually.
4. Technology and Software Licensing
Investing in technology is crucial for the efficient operation of a GCC:
Software Licenses: Enterprise software, cloud services, and ERP systems can incur initial costs ranging from ₹10 lakh to ₹30 lakh (approximately $12,000 to $36,000 USD).
Ongoing IT Maintenance: Annual maintenance and support services can cost between ₹5 lakh to ₹15 lakh (approximately $6,000 to $18,000 USD).
5. Operational and Administrative Expenses
Day-to-day operational costs include:
Utilities: Electricity, water, and internet services can cost between ₹5 lakh to ₹10 lakh (approximately $6,000 to $12,000 USD) annually.
Office Supplies: Consumables and administrative expenses can range from ₹2 lakh to ₹5 lakh (approximately $2,400 to $6,000 USD) per year.
Travel and Communication: Expenses related to business travel and communication can vary based on the scale of operations.
6. Government Incentives and Tax Benefits
India offers various incentives to attract foreign investment:
Tax Holidays: Companies operating in SEZs can avail tax exemptions on export profits for up to 15 years.
Customs Duty Exemptions: Import of capital goods and raw materials may be removed from customs duties.
Financial Assistance: State governments provide subsidies for infrastructure development and skill training.
While the setup costs can range from ₹5 crore to over ₹100 crore, the long-term benefits, including a skilled workforce, cost efficiencies, and strategic advantages, make India a compelling destination for establishing a Global Capability Center.
From incorporation to expatriate tax planning, VJM Global ensures every aspect of your GCC setup aligns with Indian legal, financial, and operational requirements. Our expert team handles the details so you can focus on long-term growth.
India does offer compelling advantages for setting up a Global Capability Center, but businesses must be prepared for the associated challenges and hidden costs.
Challenges and Hidden Costs in Setting Up a GCC in India
Establishing a Global Capability Center (GCC) in India offers numerous advantages. However, businesses must be aware of several challenges and hidden costs that can impact the success of their GCC operations.
1. Regulatory and Compliance Complexities
India’s regulatory landscape can be intricate for foreign companies. Key challenges include:
Multiple Registrations and Approvals: Setting up a GCC requires registration with various authorities, including the Ministry of Corporate Affairs (MCA), Reserve Bank of India (RBI), and Goods and Services Tax (GST) authorities. Each of these registrations involves specific documentation and compliance requirements.
Changing Labor Laws: India's labor laws are subject to frequent changes. For instance, recent amendments to labor codes have introduced new compliance requirements related to employee benefits, working hours, and termination procedures.
Data Protection Regulations: With the enactment of the Digital Personal Data Protection Act, 2023, GCCs must ensure that their data handling rules comply with stringent data protection norms.
2. Talent Acquisition and Retention Challenges
Attracting and retaining top talent in India presents several challenges:
High Attrition Rates: The technology sector in India experiences annual attrition rates ranging from 20% to 30%. High turnover leads to more recruitment and training expenses, as well as potential disruptions in project continuity.
Competitive Salary Expectations: Salaries for skilled professionals in Tier-1 cities have been rising steadily. For example, mid-level software engineers in cities like Bengaluru and Hyderabad can command annual salaries between ₹12 lakh and ₹20 lakh, which may be higher than initially budgeted.
Skill Gaps in Niche Areas: While there is an abundance of talent in general IT and engineering fields, specialized skills in areas like semiconductor design and advanced analytics are in short supply. This scarcity can lead to increased hiring costs and longer recruitment cycles.
3. Infrastructure and Operational Costs
Setting up and maintaining the necessary infrastructure for a GCC involves significant investment:
Office Space and Facilities: Premium office spaces in Tier-1 cities can cost between ₹80 and ₹150 per square foot per month. Additional expenses for office setup, including furniture, IT infrastructure, and utilities, can add up to substantial amounts.
Technology and Security Investments: Implementing IT systems, cybersecurity measures, and compliance tools requires significant capital expenditure. For instance, setting up a secure data center and acquiring necessary software licenses can cost between ₹50 lakh and ₹2 crore.
Ongoing Maintenance and Upgrades: Regular maintenance of facilities, software updates, and infrastructure upgrades incur recurring costs. These expenses can strain budgets if not adequately planned for.
4. Cultural and Operational Integration
Integrating a GCC into a global organization involves overcoming cultural and operational differences:
Communication Barriers: Differences in communication styles and time zone challenges can lead to misunderstandings and delays. Establishing clear communication protocols and overlapping working hours can mitigate these issues.
Alignment of Business Objectives: Ensuring that the GCC's goals align with the parent company's strategic objectives is crucial. Misalignment can follow into inefficiencies and missed opportunities.
Resistance to Change: Employees in the GCC may resist adopting new processes or technologies introduced by the parent company. Change management strategies and continuous training programs are essential to facilitate smooth transitions.
5. Transfer Pricing and Taxation Issues
Managing intercompany transactions between the parent company and the GCC requires careful planning:
Transfer Pricing Compliance: India's tax authorities scrutinize transfer pricing arrangements to ensure that intercompany transactions are conducted at arm's length. Companies must maintain detailed documentation and may need to obtain Advance Pricing Agreements (APAs) to mitigate the risk of audits and adjustments.
Indirect Tax Implications: Engaging in cross-border transactions can attract Goods and Services Tax (GST) and other indirect taxes. Understanding the tax implications of these transactions is vital to avoid unexpected liabilities.
Repatriation of Profits: Repatriating profits from the GCC to the parent company may involve withholding taxes and compliance with foreign exchange regulations. Planning for these aspects ensures smooth financial operations.
Ensure Compliance and Optimize Taxation Strategies for Your Cross-Border Transactions
Managing transfer pricing and taxation issues between your parent company and the GCC requires expertise and careful planning. Avoid risks related to audits, unexpected liabilities, and profit repatriation complications. To simplify your tax operations and ensure compliance, get expert guidance tailored to your business needs. Learn more about our Transfer Pricing services.
To mitigate these challenges, businesses can take advantage of several cost-saving strategies and funding options. Let’s explore how businesses can optimize their setup costs and benefit from available resources.
Cost-Saving Strategies and Funding Options for Setting Up a GCC in India
It's important to optimize costs from the outset. India offers numerous cost-saving opportunities across various operational aspects, from labor and infrastructure to taxes and government incentives. At the same time, companies must consider funding options that can ease down the financial burden and ensure a smooth establishment of their GCC.
Here are some key cost-saving strategies and funding options to consider when setting up a GCC in India:
1. Utilize Government Incentives and Subsidies
The Indian government has introduced several incentives to attract foreign businesses, especially in Special Economic Zones (SEZs), which offer significant tax benefits. These incentives help reduce operational costs and improve profitability:
Tax Holidays: Companies operating within SEZs can benefit from tax exemptions, such as a 100% income tax exemption on export income for the first five years, followed by partial exemptions for subsequent years. This is particularly beneficial for businesses looking to maximize cost savings.
Financial Assistance: The government offers financial support for infrastructure development, technology adoption, and job creation. Companies can apply for grants or subsidies under various schemes designed to support foreign investment.
Relaxed Regulatory Norms: SEZs also provide relaxed customs and import duty regulations, which can help reduce the cost of setting up operations, importing equipment, and maintaining infrastructure.
By strategically setting up in an SEZ and taking advantage of these government incentives, companies can significantly cut down on initial and recurring costs.
2. Optimize Labor Costs
India offers a pool of skilled labor at a fraction of the cost compared to Western countries. However, managing labor costs effectively is crucial for long-term savings:
Outsourcing Non-Core Functions: By outsourcing non-core activities such as IT support, HR, and customer service, businesses can save on salaries, training, and infrastructure costs. India's strong outsourcing ecosystem offers high-quality services at competitive rates, allowing companies to focus resources on their core operations.
Talent Acquisition in Tier-2 Cities: While major cities like Bengaluru, Hyderabad, and Mumbai offer a large talent pool, they also come with higher labor costs. Setting up operations in Tier-2 cities such as Pune, Chennai, and Ahmedabad can help reduce salaries and real estate costs without sacrificing access to skilled professionals.
Flexible Employment Models: Hiring employees on a contract or part-time basis for certain roles can reduce fixed labor costs, particularly when scaling operations. This model can be useful in areas such as project management, IT support, and R&D.
By adopting these strategies, businesses can manage their labor costs effectively while maintaining access to top talent.
3. Real Estate Cost Management
Real estate expenses, particularly office rent, can account for a significant portion of the cost of setting up a GCC in India. Here are a few strategies to mitigate these costs:
Choose Tier-2 or Tier-3 Cities: As mentioned earlier, Tier-2 cities like Pune, Chennai, and Hyderabad offer much lower real estate prices compared to Tier-1 cities like Mumbai or Delhi. Businesses can save up to 30-40% on office space costs by opting for these locations while still benefiting from good infrastructure and access to skilled professionals.
Co-working Spaces and Shared Offices: For businesses that are just starting or testing the waters, co-working spaces can be a cost-effective option. These spaces provide flexibility, lower initial investments, and access to high-quality office facilities without the long-term commitment of renting traditional office space.
Long-Term Leases: Once the business stabilizes, opting for long-term office leases in prime locations can result in lower monthly rents and better bargaining power with landlords. Many commercial landlords offer discounts or incentives for long-term leases, making it a cost-effective option in the long run.
4. Tax Planning and Transfer Pricing Optimization
Understanding India's complex tax regime is essential for managing operational costs. Implementing effective tax strategies can help minimize tax liabilities and improve cash flow:
Corporate Tax Rates: India offers reduced corporate tax rates for businesses operating in SEZs. These companies can enjoy tax exemptions or deductions on export income, making it more advantageous to set up operations in these areas. Additionally, tax rates for newly incorporated companies can be as low as 15%, depending on their nature of operations.
Transfer Pricing Compliance: Multinational companies with a GCC in India need to ensure that transfer pricing policies are in line with Indian regulations. By setting arm's-length prices for intercompany transactions and documenting these properly, companies can avoid penalties or adjustments from tax authorities. Proper transfer pricing strategies can also help optimize tax liabilities across multiple jurisdictions.
Goods and Services Tax (GST): India’s GST system is designed to be efficient and transparent. Businesses with a turnover above a certain threshold must register for GST, which can create opportunities for tax credits on business expenses. Proper management of GST can lead to savings by reducing the overall tax burden.
5. Funding and Financial Support Options
In addition to cost-saving strategies, several funding and financing options can help businesses reduce the initial financial burden:
Foreign Direct Investment (FDI) in India: India encourages FDI through various channels, and foreign investors can access capital through equity or debt funding. Setting up in an SEZ or a government-supported area can provide access to funding from the Indian government, including low-interest loans or grants for technology adoption.
Government Grants and Subsidies: The Indian government offers grants and subsidies for businesses in sectors like technology, R&D, and manufacturing. These grants can help subsidize costs related to infrastructure setup, talent acquisition, and innovation.
Balancing cost efficiency with smart funding choices lays the foundation for a sustainable and competitive GCC presence in India. A well-planned approach not only reduces setup expenses but also strengthens long-term operational stability.
Setting up a Global Capability Center (GCC) in India is an opportunity to unlock significant cost advantages, access skilled talent, and encourage innovation. By understanding the factors that influence the cost of establishing a GCC, businesses can make informed decisions that maximize ROI and long-term success.
Get Expert Help with Your GCC Setup in India
Partner with VJM Global to establish and operate your Global Capability Centre (GCC) in India with complete legal, tax, and operational support.
Here’s how we can help:
Entity structuring and incorporation: We help you set up a Wholly Owned Subsidiary, LLP, or other compliant structure under Indian laws.
Tax-efficient operating models: We design frameworks that cover profit attribution, GST management, and MAT planning to optimise tax outcomes.
Transfer pricing strategy: We ensure compliance through arm’s length benchmarking, master file preparation, and local file documentation.
GST services: We manage registration, refund advisory, periodic filings, and GST planning for service delivery entities.
FEMA and RBI compliance: We provide guidance on capital inflows, share allotment, and repatriation as per Indian regulations.
Expatriate tax planning: We assist with DTAA benefits, payroll structuring, and tax optimisation for expatriate employees.
Legal and regulatory support: We handle RoC filings, annual compliance, and other statutory requirements to keep your entity compliant.
Accounting, bookkeeping, and payroll: We provide end-to-end financial management services to maintain operational continuity.
Build your GCC in India confidently. Connect with VJM Global to get started today.
Contact VJM Global today to learn how we can support your GCC setup in India and help you manage the complexities of cost management, compliance, and local regulations.
FAQs
Q1. How long does it take to set up a GCC in India?
The process of setting up a GCC in India typically takes 6 to 12 months, depending on factors such as legal registrations, infrastructure setup, and recruitment efforts.
Q2. What are the main challenges companies face when setting up a GCC in India?
The challenges include managing complex regulatory frameworks, managing high attrition rates, and ensuring compliance with labor laws and tax regulations.
Q3. Can a foreign company set up a branch office or liaison office as a GCC in India?
Yes, foreign companies can set up branch offices or liaison offices in India. However, these structures are limited in terms of activities and cannot engage in revenue-generating operations.
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