Are GCCs Hitting Pause on Global Talent Moves After EY Tax Ruling?

Some of India’s global capability centres (GCCs) are rethinking how they move talent across borders after a recent Delhi High Court ruling created fresh uncertainty around the tax treatment of employee secondments.

Several multinational companies have begun reviewing their secondment programmes, while planned overseas deployments for FY27 have been put on hold pending greater clarity. 

Industry body Nasscom is also expected to seek guidance from the Finance Ministry.

The development comes at a time when India is home to more than 2,117 GCCs, with the number growing by the day. Many rely on employees from their global headquarters to set up new teams, transfer specialised knowledge, implement global processes and develop future leaders. 

A secondment is a common arrangement where an employee from an overseas office works in India for a temporary period while remaining employed by the parent company. Traditionally, the Indian entity reimburses the overseas employer for the employee's salary. These payments have generally been treated as tax-neutral reimbursements.

That understanding has now come under scrutiny.

On June 18, the Delhi High Court ruled that payments made by EY India to EY US for employees deputed to India could be treated as fees for technical services instead of simple salary reimbursements. If that interpretation is applied more widely, companies could face additional tax and compliance obligations.

A Long-Running Tax Dispute Returns

The debate dates back more than a decade. In the landmark Centrica India Offshore case, the Delhi High Court held that payments made to overseas entities for seconded employees could be treated as fees for technical services. Although several later rulings offered relief to taxpayers based on the facts of individual cases, many companies believed the issue was gradually becoming more settled.

The EY judgment has reopened that debate.

"The ruling is significant, as the issue of taxability of secondment-related cross-charges was seen to be settling after multiple favourable High Court rulings post the Centrica case," Himanshu Parekh, Partner for Tax at KPMG in India, says in an interview.

For many GCCs, secondments are an important part of the operating model, especially when new centres are being established.

"The ruling is significant because secondments are a common feature of GCC operating models, especially during set-up, transition and process stabilisation," Aditi Goyal, Partner for Taxation at Trilegal, tells AIM.

Why Companies Are Concerned

The court's decision goes beyond one dispute involving EY.

According to Goyal, the judgment suggests that simply calling a payment a salary reimbursement may no longer protect it from tax scrutiny.

If tax authorities treat these payments as service fees rather than reimbursements, Indian companies may have to deduct additional withholding tax before remitting payments to the overseas entity.

That could increase the cost of bringing overseas talent into India.

“If secondment-related charges are classified as fees for technical services, withholding tax cost and related grossing-up would add to the overall cost of deployment of overseas talent into India,” Parekh said.

Companies may also have to rethink how secondments are structured. Tax authorities are likely to examine who the employee actually works for, who controls their day-to-day activities, who pays benefits and whether the employee is providing specialised services or simply working as part of the Indian organisation.

The PE Question

Another concern is the possibility of creating a permanent establishment (PE) in India.

A PE is a taxable business presence. If tax authorities conclude that seconded employees effectively create such a presence for the overseas parent company, the foreign entity itself could face additional tax liability.

The Delhi High Court did not rule on whether a PE existed in the EY case. However, experts believe the judgment could lead to closer scrutiny of similar arrangements.

"This judgement may lead to detailed examination by the tax authorities about the PE exposure for foreign companies seconding their personnel to India," Parekh said.

Will This Slow India's GCC Growth?

Industry experts say the ruling is more likely to change how companies structure talent mobility than where they invest. They do not expect it to slow India's GCC growth.

Karthik Padmanabhan, Managing Partner for Globalisation Excellence at Zinnov, believes the ruling is unlikely to alter GCC investment flows into India. They are increasingly used for leadership development, specialised knowledge transfer, and the launch of new capabilities rather than for running day-to-day operations.

"This ruling will not change the direction of GCC investment in India. It will change how investments are structured," Padmanabhan told AIM.

He said multinational companies continue to choose India because of its engineering talent, scale and innovation capabilities. Those fundamentals remain unchanged.

Even Goyal does not expect the ruling to derail India's GCC momentum.

Instead, she believes companies may become more cautious about traditional secondment models where employees continue to remain on the overseas payroll while working in India. Some organisations may increasingly prefer local employment arrangements or redesign assignments to reduce tax risks.

Companies have already started evaluating those options.

"MNCs have taken note of this decision and have started exploring alternate structures and tax positions with a view to mitigating the potential tax exposure resulting from the decision," Parekh said.

The Industry Wants Clarity

The industry is now looking to the government for certainty.

So far, neither the Central Board of Direct Taxes (CBDT) nor the Finance Ministry has issued a clarification following the EY ruling. Nasscom is expected to seek guidance on how genuine employee secondments should be treated under tax law.

Goyal believes a clarification should clearly distinguish genuine employment secondments from cross-border service arrangements and spell out the factors tax authorities will consider while assessing such cases.

Parekh said companies would also welcome guidance on employer-employee relationships, the treatment of short-term assignments and ways to avoid double taxation where employment income has already been taxed in India.

Until then, many GCCs are expected to review their existing secondment programmes.

The EY ruling is unlikely to derail India's GCC story. But it has made one thing clear. Moving talent across borders may no longer be as straightforward as it once was. For an industry built on the free flow of global expertise, the structure of those movements may soon matter as much as the talent itself.

This version is about 900–1,000 words, removes much of the legal repetition, incorporates the Centrica context, explains secondments in plain English, and keeps the focus on what the ruling means for India's GCC ecosystem rather than on the finer points of tax law.