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A new US bill targeting outsourcing could sharply disrupt India's USD280-billion IT, BPO and Global Capability Centre (GCC) industry, which earns over 60 per cent of its revenue from the American market, the Global Trade Research Initiative (GTRI) has warned.
According to a GTRI analysis, the "Halting International Relocation of Employment (HIRE) Act", introduced in the US Senate on September 5, 2025, proposes steep penalties for companies that offshore work. The bill, unrelated to the similarly named 2010 HIRE Act, seeks to impose a 25 per cent excise tax on payments made by US firms to any foreign service provider, including for work performed entirely outside the United States. It also aims to disallow tax deductibility for such payments. "A 25 per cent tax surcharge combined with loss of deductibility could make offshore delivery meaningfully more expensive for US companies, prompting some to renegotiate contracts, rebalance delivery toward onshore or near-shore hubs, or slow down the pace of new outsourcing," noted GTRI analysis. GTRI said these measures, if enacted from January 1, 2026, would raise the cost of outsourcing for American companies and could force renegotiation of contracts, increased onshore hiring, or a slowdown in new outsourcing deals. High-volume functions such as application maintenance, back-office operations and customer support could be hit the hardest. Even in-house GCCs of US multinationals operating from India may not be insulated, as the tax applies to any payment benefiting US consumers. Indian technology firms may face pressure to expand local US staffing, accept lower margins or accelerate their shift toward higher-value digital, AI, cybersecurity and consulting services, the report noted. Uncertainty around the legislation may also affect new GCC investments in India. GTRI noted, "High-volume functions such as application maintenance, customer support, and back-office processing are particularly vulnerable. Even GCCs--captive centres that serve US parent companies--may not be sheltered, as the proposed tax applies to any payment benefiting U.S. consumers, including internal cost allocations." The bill, introduced by Senator Bernie Moreno (R-Ohio), remains at a preliminary stage, with no committee hearings or co-sponsors yet. Its passage is not guaranteed, as US technology and services companies are expected to lobby against provisions that could raise their operating costs. However, GTRI cautioned that the proposal signals growing political pushback in Washington against offshoring. "India's IT sector must watch the bill's progress closely and prepare for a scenario where the US structurally rethinks its outsourcing policy," the report highlighted. (ANI)
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