The location decision for a GCC is really two decisions taken together: which tax and operational regime to register under, and which city to build in. They used to be one, because the talent was in a handful of metros. They no longer are, because a tier-2 city can cut cost and attrition while the regime, an SEZ unit, an STPI registration, a plain domestic company, or a GIFT City unit for financial services, is chosen for its tax and operational fit. This piece works through both, and through the cost shape that follows.
At a glance
- the regime choice is SEZ, STPI, a plain domestic (non-SEZ) company, or GIFT City for financial-services GCCs;
- the SEZ income-tax holiday under section 10AA has sunset for units commencing on or after 1 July 2020;
- for a new GCC, SEZ is now chosen mainly for duty and operational benefits, not a fresh income-tax holiday;
- the city decision increasingly favours a tier-2 location, with 20–35% lower talent cost and lower attrition;
- several states run their own GCC incentives, which can move the all-in economics materially.
The regime choice
Four regimes are realistically in play, and the right one depends on the centre's export profile, its need to serve the Indian market, and whether it is a financial-services centre.
SEZ, read correctly
The SEZ regime is often described as carrying a fifteen-year income-tax holiday on export income. That is the section 10AA benefit, and the important point for a new centre is that it has sunset: units that commenced operations on or after 1 July 2020 do not get the 10AA holiday. So a GCC choosing an SEZ today is choosing it for the customs and duty treatment, the established physical and compliance ecosystem and the facilitation, not for a fresh income-tax exemption. SEZ units also face restrictions on selling into India's domestic tariff area, where such supplies are treated as imports. SEZ can still be the right answer for a pure-export centre, but on the duty-and-ecosystem case, not the holiday.
STPI and the plain domestic company
STPI remains a practical home for an export-oriented software and services centre. It offers facilitation and duty benefits and is lighter to operate than an SEZ unit, though the income-tax holiday it once carried is no longer available. A plain domestic company outside any special regime is the simplest option and the most flexible, particularly if the centre will also serve the Indian market, and it simply pays ordinary corporate tax on its cost-plus profit. For many new GCCs that do not need duty relief, the domestic company plus state incentives is a cleaner answer than an SEZ chosen for a holiday that no longer exists.
GIFT City for financial-services GCCs
A financial-institution GCC has a route the others do not: a unit in the GIFT City IFSC, under the IFSCA, which carries the IFSC reliefs including the section 80LA deduction and a single regulator for financial activity. It suits banking, insurance and capital-markets captives in particular, and it is the natural home for a Gulf or global financial group's India centre. The BFSI piece covers this route, and the GIFT City tax piece covers the reliefs and their conditions.
The city decision
The established hubs, Bengaluru, Hyderabad, Pune, Chennai and the Delhi-NCR region, still hold the deepest talent and the densest ecosystems, and remain the default for a first centre that needs scale fast. But the economics increasingly reward tier-2 and tier-3 cities, where talent costs can be 20 to 35% lower and attrition meaningfully reduced, and where a growing share of the GCC workforce is expected to sit by 2030. The right city depends on the function: scarce, senior engineering talent still concentrates in the metros, while higher-volume operations and support increasingly travel well to tier-2 locations.
State incentives
Several states actively court GCCs with their own policies, which can include capital subsidies, payroll or employment-linked support, stamp-duty relief and assistance with skilling. These can move the all-in economics materially, and they vary widely between states and city tiers, so they are worth assessing as part of the location decision rather than discovered afterwards. The incentive on offer can be the deciding factor between two otherwise comparable tier-2 cities.
Matching the regime to your centre
A short way to read the choice: a pure-export software or engineering centre that does not serve the Indian market fits STPI, or an SEZ unit if the duty and ecosystem benefits are material; a centre that will also serve Indian customers is usually cleaner as a plain domestic company, paying ordinary tax but free of the SEZ domestic-sales restriction; and a financial-services centre should weigh a GIFT City unit for the IFSC reliefs. Over the top of that regime choice sits the city and the state incentive, which can tip two otherwise comparable options. The regime should follow the centre's real operating profile, not a headline benefit, and least of all the section 10AA holiday that no longer applies to new units.
Cost, in shape
The all-in cost of a GCC is more than salaries. It is the loaded people cost, real estate, technology and connectivity, compliance and the cost-plus markup that becomes taxable profit, set against the talent-cost differential that justified the centre in the first place. A tier-2 location lowers the people and real-estate components and often the attrition cost; a state incentive can offset the early capital outlay. Modelling the cost per seat across a metro and a tier-2 option, net of incentives, is the analysis that should drive the city choice, rather than the headline salary differential alone.
In practice the model has a handful of moving parts: loaded compensation, which the city tier most affects; real estate and fit-out; technology, connectivity and security; statutory and compliance costs; and the transfer-pricing markup that turns into taxable profit. A tier-2 location lowers the first two and often attrition; a state incentive can offset the early capital outlay; the regime sets how the profit is taxed. Modelling cost per seat across a metro and a tier-2 option, net of incentives and after the markup and tax, is the analysis that should decide the city, and it routinely changes the answer that a salary comparison alone would give.
Where this goes wrong
- Choosing SEZ for a holiday that has gone. The section 10AA income-tax exemption has sunset for new units; picking SEZ expecting it is a common, costly misread.
- Forgetting the DTA restriction. An SEZ unit faces limits on serving the Indian market; if the centre needs to, a domestic company may fit better.
- Ignoring state incentives. These can be decisive and vary widely; leaving them out of the model distorts the city choice.
- Picking a city without the talent. A lower-cost city that cannot supply the specific skill at scale is a false saving; match the city to the function.
How ATB Corporate helps
We run the location decision as the two-part analysis it is: the regime that fits the centre's export and domestic profile, and the city that supplies the talent at the right cost, modelled net of state incentives. For financial-services groups we assess the GIFT City route alongside the mainland options, and we make sure the regime chosen matches the centre's actual operating needs rather than a headline benefit.
Talk to ATB about where to locate your India GCC →
FAQ
Does an SEZ still give a GCC a tax holiday?
The section 10AA income-tax holiday has sunset for units commencing operations on or after 1 July 2020. A new GCC chooses SEZ today for its customs and duty benefits and its ecosystem, not for a fresh income-tax exemption, and SEZ units also face restrictions on selling into the Indian market.
SEZ, STPI or a plain company?
It depends on the export profile and whether the centre serves the Indian market. STPI suits an export-oriented software and services centre; a plain domestic company is simplest and most flexible, especially if it will also serve India; SEZ suits a pure-export centre on the duty-and-ecosystem case. Financial-services centres should also weigh GIFT City.
Where should we locate a GCC in India?
The metros, Bengaluru, Hyderabad, Pune, Chennai and Delhi-NCR, offer the deepest talent and fastest scale, while tier-2 cities can cut talent cost by 20 to 35% and reduce attrition. The right answer matches the city to the function and counts state incentives in the model.
Do states offer incentives for GCCs?
Yes. Several states run GCC or IT policies offering capital subsidies, payroll-linked support and stamp-duty relief, which can move the all-in economics materially and vary widely, so they belong in the location analysis.
Key references
Special Economic Zones Act 2005 and section 10AA of the Income-tax Act (and its sunset for units commencing on or after 1 July 2020); the STPI scheme; state GCC / IT policies; IFSCA framework for GIFT City; Zinnov–nasscom cost and tier-2 data.
This article is general information and not tax or legal advice. Laws and IFSCA rules change, and positions should be confirmed for your specific circumstances before being relied upon.