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As India’s tax administration evolves into a more digital framework, corporations need to embrace technology-driven tax processes to boost efficiency and mitigate risks. GCCs can significantly transform global tax operations by utilising advanced tools and automation. Tax technology provides real-time oversight of compliance and litigation, while digitising core functions reduces human error, consulting and audit firm KPMG has said in a new report titled “GCCs in India: Key Tax Insights”.

“We have witnessed a tremendous potential and uptake in the GCC model. An increasing number of global organisations continue to establish their GCCs in India,” the report said.

The functional scope of these GCCs span across the entire business value chain, with GCCs taking greater end to end process accountability and driving innovation and transformation from India. Deep capabilities are being established, which present the opportunity to establish global centres of excellence (CoEs) within the GCC.

Over the years, India has witnessed huge litigation in the GCC sector, wherein MNCs were subjected to transfer pricing additions. Currently, most of the TP disputes are routinely carried from the field audits levels, i.e. from the Transfer Pricing Officers, to the Dispute Resolution Panels (DRP)s or the Commissioner of Income-tax (Appeals) (CIT(A)) leading to the Income-tax Appellate Tribunal. 

While the Act does prescribe a mandatory time limit for completion of TP audits (after being through the DRPs appeal route), no such time limit has been prescribed for completion of appellate proceedings before the CIT(A) or subsequent appellate proceedings [i.e. post DRP or CIT(A)] before the Tribunal, High Courts and the Supreme Court. 

Further, IRAs at the field audit level have routinely made adjustments for each of the subsequent years leading to multiplicity of cases for taxpayers suffering year-on-year adjustments and resulting in a huge backlog in the tribunal and courts. On the other hand, in cases where the taxpayer receives favourable judgements, the IRA have been filing appeals against the said favourable judgements. This has resulted in taxpayers carrying a large burden of uncertain tax positions, the KPMG report said.

In the recent past, the KPMG report said, MNCs have started centralising their functions particularly in the area of tax and have established tax CoEs. A tax COE is a centralised unit within a group that focuses exclusively on managing and optimising tax- related activities across regions or business units. 

• Standardising tax policies, processes and technologies
• Centralising expertise in areas like direct tax, indirect tax (GST/VAT), transfer pricing, international tax and regulatory matters
• Supporting local tax teams of the global enterprise with technical guidance and oversight
• Managing tax risk, governance and compliance globally or across regions

“As India’s tax administration evolves into a more digital framework, corporations need to embrace technology-driven tax processes to boost efficiency and mitigate risks. GCCs can significantly transform global tax operations by utilising advanced tools and automation. Tax technology provides real-time oversight of compliance and litigation, while digitising core functions reduces human error,” the report said.