India as an Export Hub: Using Your Indian Subsidiary to Serve Global Markets

India's Export Boom: The Numbers Behind the Opportunity

India's total exports of merchandise and services reached USD 790.86 billion in April-February 2025-26, a 5.79% increase over the same period last year. Merchandise exports alone stood at USD 402.93 billion, with non-petroleum exports showing even stronger growth at 5.03% year-on-year to USD 354.12 billion. Electronic goods exports surged 41.94%, driven by smartphone manufacturing, while pharmaceutical exports grew 6.46%.

These numbers reflect a structural shift. India is no longer just a domestic consumption market — it is rapidly becoming a manufacturing and services export powerhouse. For foreign companies that already have an Indian subsidiary, the opportunity is to pivot that entity from serving only the domestic market to functioning as a global export hub that serves markets across Asia, Africa, the Middle East, and even back into the parent company's home market.

The Indian government's policy stack — Production Linked Incentive (PLI) schemes, Special Economic Zones, a growing network of Free Trade Agreements, and export incentive programmes — is specifically designed to encourage this transformation. Apple's supplier ecosystem is the most visible example: India shipped over USD 50 billion worth of iPhones by early 2026, but the model applies equally to pharmaceuticals, auto components, chemicals, textiles, and professional services.

Why Your Indian Subsidiary Is Positioned for Export

Cost Arbitrage That Compounds

Indian manufacturing labour costs remain 60-70% lower than China's coastal regions, and significantly lower than Southeast Asian alternatives like Vietnam and Thailand for skilled technical workers. Engineering talent costs approximately USD 15,000-25,000 per year for experienced professionals, compared to USD 50,000-80,000 in developed markets. This cost advantage extends to raw materials, electricity (industrial rates of INR 6-8 per kWh), and commercial real estate.

Quality Infrastructure Is Already There

If you have an existing subsidiary, you already have the corporate infrastructure: legal entity, bank accounts, GST registration, compliance framework, and operational team. Converting from domestic-only to export-capable requires incremental additions — not a ground-up build.

Government Incentives Stack

India's export incentive structure is layered. A single shipment can benefit from PLI cashback, SEZ duty exemptions, RoDTEP tax refunds, FTA tariff concessions in the destination country, and duty drawback on imported inputs. These incentives are cumulative, not mutually exclusive, and can reduce the effective cost of production by 15-25%.

PLI Schemes: Cash Incentives for Export-Oriented Production

The Production Linked Incentive (PLI) scheme covers 14 sectors with actual investments of INR 2 lakh crore realised through September 2025, generating incremental production of over INR 18.7 lakh crore and creating 12.6 lakh jobs (direct and indirect).

Sectors with Active PLI Programmes

Smartphone exports demonstrate the model: exports crossed INR 1 lakh crore within just five months of FY 2025-26, 55% higher than the same period last year. The PLI cashback directly improves export margins, making India price-competitive against established manufacturing bases in China and Vietnam.

How to Access PLI Benefits

Your Indian subsidiary applies directly to the relevant ministry. Key requirements include minimum investment thresholds, incremental production targets, and domestic value addition requirements. The application process is competitive — not all applicants receive approval. Engage with the Department for Promotion of Industry and Internal Trade (DPIIT) early, and ensure your production plans align with the specific PLI scheme parameters for your sector.

SEZ and Export Processing Zones

India operates over 270 operational Special Economic Zones across the country, offering a concentrated package of tax and customs benefits specifically designed for export-oriented manufacturing.

Key SEZ Benefits for Exporters

• Income tax exemption (legacy units only) — The Section 10AA tax holiday (100% exemption on export income for the first 5 years, 50% for the next 5 years, and 50% of ploughed-back export profit for another 5 years) is closed to new entrants: only SEZ units that commenced operations on or before 31 March 2020 can claim it. New units setting up today get the customs, GST and operational benefits below but pay tax under the normal regime (typically 22% under Section 115BAA)
• Customs duty exemption — Duty-free import of raw materials, capital goods, machinery, consumables, and spares for development, operation, and maintenance of SEZ units
• GST exemption — Inter-state procurement treated as zero-rated supply; no IGST on imports
• Single-window clearance — Start construction in 4-6 weeks with simplified regulatory approvals
• No routine customs inspection — Export and import cargo not subject to routine physical inspection

SEZ vs. Domestic Tariff Area (DTA) for Exports

If your subsidiary is currently in a DTA location, you have three options to access SEZ benefits:

1. Set up a new unit in an existing SEZ — Most straightforward. Choose from 270+ operational SEZs across India
2. Apply for Export Oriented Unit (EOU) status — Available outside SEZs with similar duty-free import benefits (the Section 10A/10B income tax holiday for EOUs has also long since sunset, so the draw today is the customs and duty advantages, not an income tax exemption)
3. Use the MOOWR scheme — Manufacturing and Other Operations in Warehouse Regulations allow bonded manufacturing anywhere in India with deferred customs duties

For companies that want SEZ-level benefits without relocating, the STPI and SEZ application process is worth evaluating. Software and IT services companies should also consider STPI registration, which offers similar tax benefits with less restrictive operational requirements.

Export Incentive Programmes

RoDTEP (Remission of Duties and Taxes on Exported Products)

RoDTEP replaced the WTO-non-compliant MEIS scheme and reimburses embedded taxes, duties, and levies incurred during manufacturing and distribution of exported goods that are not refunded under any other scheme. For FY 2025-26, the government allocated INR 182.33 billion (USD 2.13 billion) for RoDTEP, covering 10,780 HS lines for DTA exports and 10,795 for AA/EOU/SEZ exports.

RoDTEP benefits are provided as transferable electronic scrips (e-scrips) based on product-specific rates as a percentage of FOB value. Rates typically range from 0.5% to 4.3% depending on the product category.

Duty Drawback

If your subsidiary imports raw materials or components that are subsequently exported as finished goods, the Duty Drawback scheme refunds the customs duties paid on those imported inputs. This is separate from RoDTEP and can be claimed simultaneously.

Advance Authorisation

Advance Authorisation allows duty-free import of inputs that are physically incorporated in the export product. Unlike Duty Drawback (which is a post-export refund), Advance Authorisation provides upfront exemption, improving working capital. Your subsidiary must maintain a specific export obligation — typically 6x the duty-saved amount within 18 months.

Leveraging India's FTA Network

India now has 16+ active Free Trade Agreements covering major trading partners. In 2025-26 alone, India concluded FTAs with the UK (July 2025), Oman (December 2025), New Zealand (December 2025), and the EU (January 2026). The EFTA TEPA entered into force on October 1, 2025.

For your Indian subsidiary, these FTAs mean preferential tariff access to destination markets:

To claim FTA benefits on exports from your Indian subsidiary, you need a Certificate of Origin (CoO) issued by the DGFT or an authorised agency. The process is largely digital through the Common Digital Platform at coo.dgft.gov.in. Ensure your products meet the Rules of Origin criteria — typically value addition of 35-40% in India or a change in tariff heading at the 4-digit HS code level.

IEC and Export Documentation

Import Export Code (IEC)

Your Indian subsidiary needs an Import Export Code (IEC) from the DGFT to export. If your subsidiary already imports goods, it likely has an IEC. If not, application is straightforward through the DGFT portal — processing takes 2-3 working days with a one-time fee of INR 500.

Export Documentation Checklist

• Commercial Invoice — Standard export invoice with FOB/CIF value
• Packing List — Detailed description of goods, quantity, weight
• Bill of Lading / Airway Bill — Shipping document issued by the carrier
• Shipping Bill — Filed electronically through ICEGATE; triggers customs clearance
• Certificate of Origin — Required if claiming FTA benefits in the destination country
• Letter of Credit / Bank Realisation Certificate — For foreign exchange compliance
• Quality/Inspection Certificates — BIS, FSSAI, or sector-specific certifications as required

Customs Process

Export customs clearance in India is handled through the ICEGATE portal. The Shipping Bill is filed electronically, and the system assigns a risk profile. Low-risk exporters benefit from facilitated clearance (no physical inspection). A licensed customs broker handles the documentation and port interactions.

Transfer Pricing for Export Subsidiaries

When your Indian subsidiary exports goods or services to the parent company or affiliated entities, transfer pricing rules apply. This is one of the most scrutinised areas for export-oriented subsidiaries.

Key Considerations

• Arm's length pricing — The export price must reflect what an independent party would charge in a comparable transaction
• Safe harbour rules — The CBDT's Notification No. 21/2025 (March 2025) extended safe harbour applicability to AY 2025-26 and AY 2026-27. For IT/ITeS services, the safe harbour margin is 17-18% on operating costs. For contract R&D services, it is 24% on operating costs. For auto components, it is 12% on operating costs
• Documentation — Maintain contemporaneous transfer pricing documentation including a master file, local file, and country-by-country report (if consolidated group revenue exceeds INR 6,400 crore). File Form 3CEB with the income tax return
• APA option — For large export volumes, consider an Advance Pricing Agreement to lock in acceptable margins for 5 years (unilateral) or 5-10 years (bilateral), eliminating audit risk

The Budget 2026 Update

Budget 2026 proposed unified safe harbour rules and a standardised 15.5% markup for unilateral APAs across multiple transaction categories. This simplification benefits export subsidiaries by reducing compliance uncertainty and providing clearer pricing benchmarks.

FEMA Compliance for Export Revenue

All export proceeds must be realised and repatriated to India within 9 months of the date of export. Key FEMA compliance points for export subsidiaries:

• Export Declaration — Every export shipment requires a declaration in the prescribed form (GR/SDF form, now filed electronically via EDPMS)
• Realisation tracking — The RBI's Export Data Processing and Monitoring System (EDPMS) automatically tracks whether export proceeds have been received against each Shipping Bill
• Write-off limits — If a buyer defaults, the AD bank can write off unrealised export bills up to 5% of total exports in the preceding year without RBI approval
• EEFC account — Exporters can retain up to 100% of export earnings in an Exchange Earners Foreign Currency (EEFC) account, useful for paying foreign suppliers without conversion losses

Services Export: The Overlooked Revenue Stream

While manufacturing exports get the headlines, India's services exports reached USD 387.93 billion in April-February 2025-26 — nearly matching merchandise exports. For foreign companies with Indian subsidiaries, services export can be an equally powerful revenue stream that requires far less physical infrastructure than manufacturing.

IT and Business Process Services

India remains the global leader in IT services outsourcing, and your subsidiary can provide software development, data analytics, cloud management, AI/ML services, and business process management to group companies and third-party clients worldwide. Services exports are zero-rated for GST purposes, meaning no output GST liability on exports while retaining full input tax credit. STPI-registered units enjoy additional benefits including duty-free hardware imports and simplified regulatory compliance.

Engineering and Design Services

Global Engineering Centres (GECs) in India serve automotive, aerospace, industrial equipment, and semiconductor companies. Your subsidiary can house engineering teams that provide CAD/CAM design, simulation, testing, prototyping, and R&D services to the parent company or other affiliates. India has over 1,500 GECs employing approximately 500,000 engineers, with Bengaluru, Pune, Hyderabad, and Chennai as the primary hubs.

Professional and Consulting Services

Subsidiaries can export legal research, financial analysis, accounting services, market research, and consulting deliverables. The India-UK CETA and India-EU FTA include significant services liberalisation provisions, opening new markets for India-based professional services.

Contract Research and Clinical Trials

Pharmaceutical and biotech companies can use their Indian subsidiary to conduct contract research, clinical trials (India has a large treatment-naive patient population), and pharmacovigilance services. The cost of conducting a Phase III clinical trial in India is approximately 40-60% lower than in the US or EU, with comparable quality standards under the Central Drugs Standard Control Organisation (CDSCO).

Transfer Pricing for Services Exports

Services exports to group companies require careful transfer pricing structuring. The CBDT safe harbour rules specify a minimum markup of 17-18% on operating costs for IT/ITeS services and 24% for contract R&D. For engineering services and consulting, benchmark using the Transactional Net Margin Method (TNMM) against comparable Indian companies. Budget 2026's proposed unified 15.5% markup for unilateral APAs could simplify pricing for multi-service subsidiaries.

Districts as Export Hubs (DEH): Accessing India's Geographic Spread

The government's Districts as Export Hubs (DEH) initiative maps each of India's 760+ districts to their natural export strengths — whether it is Moradabad for brassware, Tiruppur for knitwear, Surat for diamonds, or Erode for turmeric. For foreign companies, this programme offers practical value: state-level export facilitation teams, dedicated infrastructure, logistics subsidies, and connections to local supplier clusters.

E-Commerce Export Hubs (ECEHs) complement this by enabling smaller shipments through platforms like Amazon Global Selling and Flipkart, allowing your subsidiary to test export products with lower minimum order quantities before committing to bulk container shipments. These hubs provide simplified customs clearance for e-commerce parcels, reducing the operational complexity of entering new markets.

Setting Up the Export Function: A 90-Day Playbook

Weeks 1-2: Regulatory Setup

• Obtain or verify IEC registration with DGFT
• Register on ICEGATE for electronic customs filing
• Enrol on the DGFT Common Digital Platform for Certificate of Origin
• Register for RoDTEP benefits (ensure your HS codes are covered)

Weeks 3-4: Operational Setup

• Appoint a licensed customs broker for the port/airport of export
• Set up EDPMS compliance process for export realisation tracking
• Establish quality control and inspection processes for export-grade products
• Identify and contract with freight forwarders and logistics providers

Weeks 5-8: First Shipment

• Complete buyer due diligence and execute export contracts
• Arrange export credit insurance (ECGC) if selling on credit terms
• Process first Shipping Bill through ICEGATE
• Obtain Certificate of Origin if shipping to an FTA partner country
• Complete bank documentation for Letter of Credit or advance payment

Weeks 9-12: Optimisation

• Review and claim RoDTEP scrips for completed exports
• File for Duty Drawback on imported inputs used in export goods
• Apply for Advance Authorisation for upcoming import requirements
• Evaluate SEZ/EOU relocation or MOOWR registration for larger operations
• Set up transfer pricing documentation and benchmarking studies

State-Level Incentives Worth Capturing

Beyond central government incentives, Indian states actively compete for export-oriented manufacturing with additional benefits:

• Tamil Nadu — Capital subsidy up to 15%, stamp duty exemption, employment incentive of INR 4,000-6,000 per new employee per month for 3 years
• Gujarat — Interest subsidy of 7% for 5 years, electricity duty exemption, land at concessional rates in industrial parks
• Maharashtra — Industrial Promotion Subsidy (IPS) of up to 50% of eligible investment, electricity subsidy, stamp duty exemption
• Karnataka — Land conversion fee waiver, interest-free loan for first 3 years, single-window clearance in 30 days
• Telangana — T-IDEA scheme with investment subsidy of 15-20%, power tariff subsidy, stamp duty reimbursement

Key Takeaways

• India's exports crossed USD 790 billion in FY 2025-26 — the structural shift to export manufacturing is real and accelerating
• PLI schemes across 14 sectors provide direct cash incentives of 4-18% of incremental sales, with INR 2 lakh crore already invested
• SEZ units offer duty-free imports, GST zero-rating and simplified customs; the 100% income tax holiday under Section 10AA is closed to units commencing operations after 31 March 2020, so new entrants benefit from the customs/GST side but pay tax under the normal regime
• RoDTEP, Duty Drawback, and Advance Authorisation can be claimed simultaneously, reducing effective production costs by 15-25%
• India's 16+ FTAs provide preferential tariff access to ASEAN, Japan, Korea, UAE, Australia, UK, and the EU — your Indian subsidiary can access markets that your home country may not have FTAs with
• Transfer pricing safe harbour rules (updated March 2025) provide clear margin benchmarks for IT/ITeS (17-18%), R&D (24%), and auto components (12%), reducing audit risk for export subsidiaries
• An existing subsidiary can set up the export function in approximately 90 days, from IEC registration to first shipment