New Delhi, Sep 06 The 56th GST Council meeting has enacted significant tax reforms that are expected to bolster Global Capability Centres’ (GCCs) operations in India by enhancing global competitiveness, improving cost structures, and optimizing cash flows.
A key reform, the omission of Section 13(8)(b) of the IGST Act, rectifies the risk of “intermediary” classification for services provided by GCCs to overseas affiliates. This change ensures that such services are now determined by the recipient’s location, treating them as exports eligible for zero-rating and Input Tax Credit (ITC) refunds.
This amendment is anticipated to provide greater certainty, boost competitiveness, and potentially alleviate prolonged litigation, while also opening new growth avenues for GCCs by allowing them to transition intermediary functions to India.
The Council also revised GST rates on various goods and services, including reductions for air conditioners and monitors, and increases for passenger transport/renting of motor vehicles and air transport services (excluding economy class), presenting both positive and negative impacts for GCCs depending on their procurement activities and ITC eligibility.
Furthermore, improvements to the refund process, specifically concerning the provisional sanctioning of 90% refunds, are set to become more effective. By transitioning to a system-based, risk-prioritized identification and evaluation of refund claims, this provision, operational from November 1, 2025, is expected to ease working capital pressure and enhance cash flow predictability through faster, risk-based refunds. Concurrently, the number of GCCs in India is projected to rise from 1,700 to over 2,200 by 2030.
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