Top 10 Legal & Tax Mistakes to Avoid When Establishing a GCC in India

1. Choosing the Wrong Legal Structure

Selecting between a subsidiary, LLP, branch, or joint venture significantly impacts liability, compliance burden, and tax exposure.

• A Private Limited Company allows 100% foreign ownership and limited liability, but demands director compliance, board routines, and stricter filings.
• An LLP is lighter in governance but may raise concerns around investor appeal and transfer pricing.
• Sansovi assists with entity structuring, ensuring you choose the optimal form based on goals, control, and cost efficiency.

2. Underestimating Permanent Establishment (PE) Risks

Global firms risk creating a PE in India, resulting in up to 40% tax on profits plus filing burdens.

• Activities involving governance, client engagement, or embedded reporting can trigger PE status.
  Sansovi’s fix → We draft clear SOPs and reporting lines preventing inadvertent PE formation.

3. Neglecting Transfer Pricing Compliance

Inter-company transactions must reflect arm’s-length pricing. Inaccurate cost-plus margins, unaccounted overheads (e.g. FX losses), or lack of robust FAR analysis are common triggers for audits and adjustments.
Sansovi’s fix → We conduct rigorous FAR analyses, benchmarking, and prepare audit-ready documentation aligned with Indian tax standards.

4. Delaying PAN, TAN & GST Registrations

Registering for PAN, TAN, and GST should commence immediately after incorporation. Delays can lead to penalties, invoicing delays, or blocked services.
Sansovi’s fix → Our onboarding includes tax registration management, ensuring all government IDs are in place pre-launch.

5. Mismanaging Secondment Arrangements

Deploying parent-company staff to India without clear contracts can create Service PE scenarios or trigger GST on imports of services.
Sansovi’s fix → We craft comprehensive secondment agreements, clarify local supervision, and address GST implications.

6. Ignoring State-Level Labor Rules

India’s labor laws vary by state covering Shops & Establishments, PF, ESIC, Professional Tax, POSH, gratuity, and minimum wages. Missteps invite fines and legal scrutiny.
Sansovi’s fix → Our HR compliance engine auto-enforces adherence to all central and state-level regulations, minimizing risk.

7. Overlooking IP & Data Protection

While GCCs frequently own IP, foreign firms often delay IP registration in India. Also, the Digital Personal Data Protection Act (2023) imposes GDPR-style obligations.
Sansovi’s fix → We guide you through IP registration and implement robust data governance frameworks, including DPO appointment and privacy workflows.

8. Missing Out on SEZ/STPI Incentives

Operating from an SEZ or STPI can yield tax holidays, exemptions on imports, and indirect tax benefits. Failing to claim them is a lost advantage.
Sansovi’s fix → We assess geography and model against SEZ/STPI incentives, ensuring you access every financial upside.

9. Overlooking Indirect Tax & Input Tax Credit

Misclassifying exports as zero-rated under GST, or mishandling input tax credits, can cause costly audits.
Sansovi’s fix → Our in-house tax ops optimize GST setup, manage returns (GSTR‑1, 3B), and recover eligible credits seamlessly.

10. Ignoring Ongoing ROC & Tax Filings

Annual ROC filings, Director KYC, statutory audits, income tax returns, and TDS declarations are mandatory. Non‑filing attracts penalties and legal action.
Sansovi’s fix → We manage annual compliance cycles end‑to‑end, sending reminders, filing documents, and delivering seamless audits.

Why Sansovi is Your Trusted GCC Partner

Feature	Benefit for GCC Clients
GCC-as-a-Service	One-stop end-to-end setup legal, tax, HR, IT
Local Expertise	In-house tax, legal, labor, and data teams
Audit Ready	Pre-audited filings ensure compliance integrity
Tech-Enabled	Compliance dashboard offers real-time tracking
Scalable Fit	From start-ups to enterprise Global Capability Centres

Final Takeaway

Establishing a GCC in India is a strategic move but one riddled with legal and tax pitfalls. From entity selection to transfer pricing, labor laws, data compliance, and indirect taxes—these complexities can cumulatively erode ROI or even risk closure.
Sansovi eliminates these pitfalls through its integrated GCC-as-a-Service model, offering local compliance, global governance, and full stack support for a secure, compliant, and efficient launch in India.

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