What is a Global Capability Centre (GCC) in India?

A Global Capability Centre (GCC) is an offshore entity established by multinational corporations in India to deliver technology services, R&D, business process support, and innovation capabilities. India hosts over 1,800 GCCs employing more than 1.9 million professionals, making it the world's largest GCC destination. GCCs operate as wholly owned subsidiaries, joint ventures, or branch offices, providing cost arbitrage, access to skilled talent, and 24/7 operational capabilities.

What is the typical cost of setting up a GCC in India?

GCC setup costs in India typically range from USD 50,000 to USD 500,000 for legal, regulatory, and initial operational expenses, depending on complexity. This includes incorporation fees (Rs 10,000-50,000), legal advisory (USD 15,000-50,000), initial office setup (varies by city—Bengaluru and Mumbai are most expensive), and compliance registrations. Ongoing annual compliance costs range from USD 20,000-100,000 depending on entity size and regulatory requirements.

Which cities in India are best for establishing a GCC?

Bengaluru leads with 870+ GCCs, strongest for deep tech, AI/ML, and product engineering. Hyderabad (500+ GCCs) excels in cloud infrastructure and pharma R&D. Pune (400+ GCCs) is ideal for automotive engineering with highest retention rates. Chennai (350+ GCCs) offers manufacturing expertise. NCR (400+ GCCs) provides regulatory proximity. Mumbai (300+ GCCs) leads in financial services. Ahmedabad (150+ GCCs) is emerging with GIFT City benefits and 30-40% lower costs.

What are the tax benefits for GCCs in India?

GCCs can benefit from: (1) Section 115BAA concessional corporate tax rate of 22% (effective ~25.17%); (2) SEZ units enjoy 100% income tax exemption for first 5 years, 50% for next 5 years; (3) GST zero-rating for export services with input tax credit refunds; (4) State incentives including capital subsidies (15-30%), stamp duty exemptions, and employment incentives; (5) GIFT City IFSC offers 100% tax exemption for 10 of 15 years and zero GST/STT.

How long does it take to incorporate a GCC entity in India?

GCC incorporation typically takes 3-6 weeks: SPICe+ form processing (7-10 days), DSC procurement (2-3 days), name reservation (3-5 days), document drafting (1 week), and post-incorporation registrations including PAN, TAN, bank account (2 weeks). SEZ unit approval adds 4-6 weeks. Branch office RBI approval requires 8-12 weeks. Expedited timelines possible with pre-planning and professional advisory.

What is DPDPA compliance requirement for GCCs?

The Digital Personal Data Protection Act 2023 (DPDPA) requires GCCs to: (1) Obtain informed, specific consent for personal data processing; (2) Implement data minimization and purpose limitation; (3) Appoint Data Protection Officer if classified as Significant Data Fiduciary; (4) Notify breaches to Data Protection Board and affected individuals; (5) Ensure cross-border transfers only to non-restricted countries; (6) Implement children's data protections with verifiable parental consent.

What transfer pricing method is used for GCC services?

Transactional Net Margin Method (TNMM) is most common for GCC software development services, using operating margin (OP/TC or OP/Sales) as profit level indicator. Arm's length range typically 15-25% for software development. Cost Plus Method (10-15% markup) applies for routine services. Advance Pricing Agreements (APAs) provide 4-5 year certainty. Safe harbor rules under section 92CB offer cost-plus 15-20% for eligible services.

Should a GCC be located inside or outside an SEZ?

SEZ location offers substantial tax benefits (100% income tax exemption for 5 years) but with constraints: minimum export obligation, DTA sales restrictions, physical infrastructure requirements, and DESH Bill sunset risk. Non-SEZ provides operational flexibility for domestic market pivot. Decision matrix: For export-focused R&D/IT services GCCs with minimal India revenue, SEZ is attractive. For GCCs supporting India sales or anticipating domestic expansion, non-SEZ offers flexibility.

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Home Global Capability CentresIntellectual Property & Technology Transfer

IP & Technology

Intellectual Property & Technology Transfer

IP ownership frameworks, technology transfer protocols, patent prosecution, trade secret protection, and innovation management for GCC R&D operations.

Overview

GCC R&D operations generate valuable IP requiring sophisticated legal structuring. IP ownership allocation impacts transfer pricing, withholding tax obligations, and monetization ability. Technology transfer from parent involves FEMA compliance and customs valuation. Patents Act 1970 creates India-specific obligations including compulsory licensing and working requirements. Trade secret protection demands contractual and technical safeguards.

Intellectual Property & Technology Transfer - Professional Legal Services

Key Considerations

IP ownership structure: parent vs GCC ownership and transfer pricing implications

Technology transfer agreements: FEMA compliance and royalty tax treatment

Patent prosecution strategy: India-first filing for cost arbitrage, PCT route

Trade secret protection: contractual NDAs, technical DLP controls, exit formalities

Open source compliance: GPL vs permissive licenses, software composition analysis

Cross-border royalty flows: 10-15% withholding tax, FTS vs royalty characterization

Regulatory Framework

Patents Act 1970 & Rules 2003

Patent filing, examination, grant, opposition, and working requirements. Section 2(1)(s): Indian GCC employee is true inventor (excludes importers). Assignment deed transfers rights to parent. Section 68: register assignment within 6 months. Timeline: 18-month publication, 48-month examination request deadline, 3-5 year grant. Section 146: annual working statements (form 27). Costs: Rs 1.5-3L filing, Rs 4-16K annual maintenance. Strategy: India-first filing (Rs 1.5L) then PCT within 12 months claiming priority.

Copyright Act 1957 & IT Act 2000

Software copyright and trade secret protection. Section 17: employer owns work created during employment. Section 19: written assignment required specifying scope, territory, duration. Section 72A IT Act: disclosure of confidential info punishable. Open source: GPL requires source disclosure if distributing derivative work (SaaS deployment typically not distribution). Apache/MIT licenses permissive, require attribution only.

TCL Framework Application

Technical Dimension

Invention disclosure processes with IP committee assessment. Prior art searches identify blocking patents. Patent drafting: claims in multiple dependencies, enabling disclosure. Software copyright: version control documenting authorship. Trade secret classification and need-to-know access controls. Open source governance: OSRB approval, SBOM maintenance.

Commercial Dimension

IP valuation for transfer pricing: income approach (DCF of royalties), market comparables (3-8% revenue for software), cost approach (R&D capitalized). GCC-parent models: (1) contract R&D (cost-plus 8-12%, parent owns); (2) principal (GCC owns, 5-10% royalty to parent, 10-15% withholding tax); (3) co-ownership (40/60 split). Patent costs: Rs 1.5-3L filing, Rs 20-50L litigation.

Legal Dimension

Patents Act section 68: register assignments within 6 months. Technology transfer from parent: RBI approval if royalty >8% revenue or lumpsum >USD 2M. Patent prosecution: file, publish 18 months, examine 48 months, FER response, grant 3-5 years. Post-grant: form 27 working statements annually. Trade secret litigation: Anton Piller order for evidence preservation, injunction, 2-5 year trial.

Practical Guidance

Implement invention disclosure with IP committee assessment within 30 days

Draft employment IP clauses: invention assignment, cooperation obligation, moral rights waiver

Establish open source governance board (OSRB) for external library approval

Negotiate technology transfer agreements with 5% royalty cap, step-down after 3 years

Conduct freedom-to-operate analysis with patent attorney opinion before product launch

Implement trade secret program: contractual NDAs, DLP tools, access controls, exit formalities

Common Pitfalls

Failure to register IP assignments within 6 months—void against subsequent assignees

GPL non-compliance—incorporation triggers copyleft obligation to disclose source code

Inadequate TP documentation for technology payments—tax reclassification, penalties

Employee invention disputes—Patents Act section 140 compensation claims by departing inventors

Over-reliance on software patents—3-5% grant rate, 4-5 year timeline, rapid obsolescence

Frequently Asked Questions

Should GCC or parent own IP developed in India?

Most GCCs adopt parent ownership for TP simplicity (cost-plus 8-12% service fee, no royalty flows), global IP consolidation, and repatriation efficiency. GCC ownership requires substance (funding R&D, key inventors employed, strategic control) and triggers withholding tax 10-15% on royalties. Exceptions: life sciences GCCs with India-specific R&D where local IP ownership facilitates monetization and compulsory licensing defense.

How to protect trade secrets with high employee mobility in tech clusters?

Multi-layered strategy: (1) Contractual—confidentiality obligations, invention assignment, non-solicitation 12 months (enforceable unlike non-compete), liquidated damages Rs 10-50L; (2) Technical—DLP tools monitoring email/USB, access controls, encryption AES-256, watermarking; (3) Organizational—security training, exit interviews, access audits; (4) Relationship—retention packages, garden leave for critical roles; (5) Legal—publicize prosecutions for deterrence. Focus on tangible assets (code, customer lists) as knowledge in employee head difficult to police per case law.

Tax implications of royalty payments from GCC to parent for technology?

Withholding tax: 10% (US treaty), 15% (most EU treaties) on royalty payments. Software licensing ambiguous—license (right to use) is royalty, but if bundled with customization/training/support may qualify as FTS (fees for technical services) under Protocol. Transfer pricing: royalty rate must be arm's length per section 92, benchmark against third-party licenses (scarce comparables), profit split method alternative. File Form 15CA/15CB, obtain parent TRC for treaty benefits. Consider bilateral APA to lock in 5-year pricing, Rs 10-15L professional fees but eliminates audit risk.

Global patent coordination for GCC-filed Indian patents?

Centralized IP committee reviews all GCC invention disclosures, decides filing strategy. India-first filing for cost arbitrage (Rs 1.5L vs USD 10-15K US provisional), obtain automatic foreign filing permission (section 39: no secrecy direction within 6 weeks), file PCT claiming India priority within 12 months, enter national phase (US, EU, China, Japan) within 30 months. Maintain consistent inventorship across jurisdictions (US and India both require all inventors named). Annual portfolio pruning: abandon low-value patents (India Rs 4-16K maintenance vs US USD 1.2-7.4K, EP EUR 500-6K per country), retain strategic patents covering current products or defensive against competitors.

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