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India's Information Technology (IT) and IT-Enabled Services (ITES) sector, particularly the captive service provider segment operating within Multinational Enterprises (MNEs), stands as a cornerstone of the nation's economy. These captives engage in extensive cross-border transactions with their associated enterprises (AEs), making transfer pricing (TP) a paramount area of focus for both taxpayers and the Indian tax administration. This article provides an analysis of the TP landscape for captive IT/ITES providers in India, focusing on practical challenges, dispute resolution mechanisms, and policy considerations.
INTRODUCTION: CAPTIVE IT & ITES PROVIDERS IN INDIA1
The Indian IT/ITeS sector holds a prominent global position and has significantly driven export growth. Within this dynamic landscape, captive service providers, commonly structured as Global Capability Centres (GCCs), play an essential role. GCCs, subsidiaries of Multinational Enterprises (MNEs), are primarily established to deliver specialised services to other entities within their global groups. India hosts over 1,700 GCCs employing more than 1.9 million professionals. These GCCs typically offer diverse services such as software development (SWD), IT-enabled services (ITES)—including back-office support—Knowledge Process Outsourcing (KPO), engineering design, and contract
