Cost-plus or entrepreneurial: the GCC decision you make once
The transfer pricing model chosen at GCC setup fixes the taxable margin for the life of the centre. Changing it later invites exactly the scrutiny you were trying to avoid.
Every Global Capability Centre in India runs on one of two transfer pricing models, and the choice is made — often by default — in the first month.
Cost-plus
The Indian entity is a service provider earning a guaranteed markup on its cost base. Simple, defensible, and the standard for captives. It also caps the entity permanently at a low margin, and every rupee of value created in India accrues to the parent.
Entrepreneurial entity
The Indian entity owns risk and residual profit. Justifiable where the centre genuinely owns IP, makes decisions, and bears commercial risk. Substantially harder to defend, and only credible if the substance matches.
Why the choice is close to irreversible
A change in model is a change in the functional and risk profile, and Indian transfer pricing authorities read that as a restructuring — with attendant exit-charge questions. The documentation you file in year one sets the expectation for every year after.
Decide it deliberately, alongside the BOT transfer mechanics if you are using one, rather than inheriting whichever model the first year of filings assumed.