Tariffs don't touch you: Why service exporters are India's real winners right now
The US tariff barrage through 2025 battered Indian goods exporters with rates as high as 50%. Gems-and-jewellery shipments collapsed nearly 60%. Textile hubs halted production lines. Seafood exporters faced combined duties of up to 58%.
Yet India's service exporters sailed through entirely untouched. Service exports hit a record $387.5 billion in FY2025, growing 13.6% year over year. They now account for nearly half of India's total exports. The reason is structural and powerful. Tariffs apply only to physical goods crossing a border. Software, consulting, design work, and SaaS delivered digitally over the internet simply cannot be taxed at a port.
For India's 5.9 million tech workers, 1,900-plus Global Capability Centres, and 15 million freelancers, the great tariff war might as well be happening on another planet.
The tariff rollercoaster that crushed goods exporters
The timeline of US tariffs on India reads like a thriller with no clean ending. On April 2, 2025, President Trump signed an executive order slapping a 26% reciprocal tariff on Indian goods. A week later, he paused the country-specific portion for 90 days while keeping the 10% baseline.
When that pause expired on July 31, a 25% reciprocal tariff took effect. Then things got worse. On August 27, Trump imposed an additional 25% tariff on imports from India for its continued purchases of Russian oil. The effective rate hit a punishing 50%, among the highest levied on any US trading partner.
The damage was swift and measurable. Indian goods exports to the US fell 37.5% between May and September 2025. They dropped from $8.8 billion to $5.5 billion monthly. The gems-and-jewellery sector saw exports collapse from $500 million in May to just $203 million in September.
Auto components, which send roughly 29% of output to the US, saw margins squeezed as buyers demanded cost absorption. Textile hubs in Tirupur and Surat halted production lines entirely. The US tariffs affect Indian goods across nearly every merchandise category.
A diplomatic sprint in early February 2026 produced a framework deal. India agreed to lower trade barriers, and Trump cut the reciprocal tariff to 18%. But on February 20, 2026, the US Supreme Court ruled 6-3 that the president lacked authority to impose tariffs under IEEPA. This invalidated the entire reciprocal tariff architecture overnight.
Trump pivoted to a 10-15% temporary surcharge under Section 122 of the Trade Act of 1974. As of late February 2026, Indian goods still face this surcharge plus 50% duties on steel and aluminium. Negotiations remain paused, and uncertainty reigns.
Service exports powered through the storm
Against this chaos, India's service economy posted record after record. Total service exports reached $387.5 billion in FY2025, up from $341 billion the year before. In the April-November 2025 window alone, services generated $270 billion. That pace points toward roughly $430-440 billion for full-year FY2026.
Services now account for 46.9% of India's total exports, approaching parity with merchandise exports for the first time. India's service exports for 2026 are on track to set yet another all-time high.
The IT sector drives this engine. NASSCOM's Strategic Review, released February 24, 2026, pegged total tech industry revenue at $297 billion for FY2025. It projected $315.4 billion for FY2026, crossing the $300 billion milestone for the first time.
Tech exports alone should exceed $246 billion in FY2026, growing 5.6% even as global macro conditions tighten. Engineering R&D leads segment growth at 7.7%. Business process management follows at 7%, reflecting a shift toward higher-value work.
The US remains the single largest market, absorbing 54.1% of India's IT exports. Europe accounts for 30.8%. Computer and business services account for roughly 70% of total service exports. India's services trade surplus swelled to $188.6 billion in FY2025. This cushion offset a significant chunk of the merchandise trade deficit and kept the current account manageable.
Why tariffs cannot reach digital services
The immunity of services from tariffs is not a loophole. It is a fundamental feature of international trade law. Tariffs exist under the GATT framework, which governs merchandise trade. Customs authorities assess duties on physical goods that cross a border using standardised valuation methods.
Services fall under the General Agreement on Trade in Services (GATS), which contains no tariff mechanism whatsoever. Trade barriers for services take entirely different forms: licensing requirements, nationality restrictions, and regulatory approvals. But never customs duties.
When an Indian software engineer delivers code to a US client, the deliverable crosses the border as an electronic transmission. There is no shipping container to inspect. No bill of lading to stamp. No port of entry where a customs officer could apply a duty. This makes digital services tariff-free by their very nature.
Reinforcing this structural immunity is the WTO Moratorium on Customs Duties on Electronic Transmissions. Maintained since 1998, it was most recently renewed at the MC13 ministerial in Abu Dhabi in March 2024. Even if this moratorium lapses, over 140 WTO member nations have signalled continued commitment to duty-free digital trade. Major FTAs like USMCA and CPTPP have permanently embedded the principle.
If you are an IT professional or firm looking to tap into this tariff-free corridor, here is a step-by-step guide to exporting IT services to the USA.
The GCC boom is rewriting India's role in global business.
One of the most powerful structural shifts behind India's service export story is the explosive growth of Global Capability Centres in India. As of late 2025, India hosts 1,700 to 2,100-plus GCCs employing approximately 1.9 to 2.0 million professionals. These centres generate $64.6 billion in annual revenue and represent more than half of all GCCs worldwide.
The pace of new establishments is striking. Roughly 110 new GCCs launched between 2024 and 2025. Google inaugurated its 1.6 million-square-foot Ananta campus in Bengaluru. Vanguard is building what will become its largest tech centre worldwide in India. JPMorgan Chase, Goldman Sachs, and Walmart operate some of their biggest offshore units here.
GCCs have evolved far beyond cost-arbitrage back offices. They now function as strategic innovation hubs, spanning product development, AI research, cybersecurity operations, and engineering R&D. The sector is projected to reach $100 billion in revenue by 2030 and employ 2.5 to 2.8 million professionals.
Karnataka became the first state to launch a dedicated GCC policy in November 2024, aiming to establish 500 new centres by 2029. The Union Budget 2026 sweetened the deal further with a uniform 15.5% safe-harbour margin for transfer pricing. This covers over 1,000 existing GCCs.
A paradox of US immigration policy is accelerating this trend. H-1B approvals for India's top seven IT firms fell to a decade-low of 4,573 in FY2025, a 70% decline from 2015. The Trump administration's $100,000 fee on new H-1B petitions made onsite staffing prohibitively expensive. The result is a talent reversal. FAANG companies added roughly 33,000 workers in India in 2025 alone, an 18% increase. What the visa wall blocks, the GCC pipeline absorbs.
India's 15 million freelancers are the tariff-proof frontline.
India is the world's second-largest freelancing economy with an estimated 15 million-plus freelancers earning from international clients. Indian freelancers drive 13.4% of Upwork's global revenue. The freelance platform market in India is growing at a 24% CAGR through 2030.
These individuals represent the most direct embodiment of tariff-proof exporting. A web developer in Jaipur billing a US client faces zero customs friction. A UI/UX designer in Kochi delivering assets via Figma encounters no border checkpoint. Indian freelancers' international payments flow through digital rails that no tariff wall can intercept.
The cost advantage is enormous. Indian IT professionals deliver work at 50-70% lower cost than their US counterparts. A senior software engineer earns $40,000 to $50,000 in India versus $150,000 to $180,000 in the US. Factor in India's 265 million English speakers, a UTC+5:30 time zone enabling follow-the-sun development, and the world's cheapest mobile data at roughly $0.10 per GB. The structural advantages compound quickly.
India's digital infrastructure has matured rapidly. Over 900 million Indians are now online. The country completed the world's fastest 5G rollout, covering 85% of the population in just 22 months. India produces 2.55 million STEM graduates annually and contributes 23% of the global software engineering talent pool. With 159,000-plus DPIIT-recognised startups and 125-plus unicorns, the ecosystem feeding service exports is deep and self-reinforcing.
To make the most of this structural advantage, freelancers should explore the best ways to receive international payments in India without losing earnings to hidden fees.
Policy tailwinds and persistent headwinds
The Indian government has broadly aligned its policy to support service exporters. The GST framework zero-rates export services. Freelancers and firms can file a Letter of Undertaking to export without paying GST. Section 44ADA offers presumptive taxation at 50% of gross receipts for professionals earning up to ₹75 lakh.
The RBI extended the FEMA export realisation period from 9 to 15 months in November 2025. It also opened foreign currency accounts at GIFT City for exporters. The India-UK CETA, signed in July 2025, committed to market access for 137 service sub-sectors. It exempts Indian workers from UK social security contributions for up to three years, saving an estimated ₹4,000-plus crore annually.
However, significant challenges persist. Digital services taxes in the UK at 2%, France at 3%, and Italy at 3% create compliance complexity for Indian service providers. Data localisation rules under the EU's GDPR constrain cross-border data flows since India lacks adequacy status. Visa freezes at US consulates, with no H-category appointments available until May 2027, forcing costly workarounds for onsite work components.
Currency volatility creates revenue unpredictability for small exporters who lack hedging capabilities. The compliance burden for solo freelancers also remains heavy. GST registration, FEMA Softex forms, quarterly advance tax, and mandatory ITR-3 filing all add overhead that larger firms absorb more easily.
The road to $500 billion runs through AI and services
The trajectory ahead is steep but credible. NASSCOM projects the tech industry will hit $315 billion in FY2026 and keep compounding. Goldman Sachs estimates India's total services exports could reach approximately $800 billion by 2030. The government targets $1 trillion in combined services exports as part of a $2 trillion total export goal by 2030.
AI is both the greatest accelerator and the most serious structural risk. Over 80% of Indian enterprises are actively building autonomous AI agents and moving from experimentation to production. India added 5.2 million new developers in 2025, accounting for one in three of the new developers globally. It ranks second worldwide in contributions to public GenAI projects.
New high-value service categories like AI/ML engineering, cloud architecture, cybersecurity, and fintech analytics are growing faster than traditional IT outsourcing. NASSCOM estimates AI-related services could contribute $30-50 billion in incremental revenue over the next three to five years.
Yet the AI transition demands massive reskilling. An estimated 5.7 million IT employees face retraining requirements. India's R&D spending remains low at 0.7% of GDP, well below innovation leaders. Competition is intensifying from Vietnam, the Philippines, and Eastern Europe. The winners will be those who climb the value chain from cost arbitrage to intellectual property creation and complex consulting.
The US-India tariff saga of 2025-2026 has been a brutal stress test for merchandise exporters. But it has also highlighted the extraordinary structural advantage of India's service economy. Services are constitutionally immune to tariffs under international trade law. India's $387.5 billion service export machine, powered by 1,900-plus GCCs, 5.9 million tech workers, and 15 million freelancers, operated at full throttle while goods exporters scrambled to survive 50% duties. For Indian professionals, freelancers, and service businesses, the message is clear. The tariff war is someone else's problem. Your competitive moat just got wider.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial or legal advice. Winvesta makes no representations or warranties about the accuracy or suitability of the content and recommends consulting a professional before making any financial decisions.
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The US tariff barrage through 2025 battered Indian goods exporters with rates as high as 50%. Gems-and-jewellery shipments collapsed nearly 60%. Textile hubs halted production lines. Seafood exporters faced combined duties of up to 58%.
Yet India's service exporters sailed through entirely untouched. Service exports hit a record $387.5 billion in FY2025, growing 13.6% year over year. They now account for nearly half of India's total exports. The reason is structural and powerful. Tariffs apply only to physical goods crossing a border. Software, consulting, design work, and SaaS delivered digitally over the internet simply cannot be taxed at a port.
For India's 5.9 million tech workers, 1,900-plus Global Capability Centres, and 15 million freelancers, the great tariff war might as well be happening on another planet.
The tariff rollercoaster that crushed goods exporters
The timeline of US tariffs on India reads like a thriller with no clean ending. On April 2, 2025, President Trump signed an executive order slapping a 26% reciprocal tariff on Indian goods. A week later, he paused the country-specific portion for 90 days while keeping the 10% baseline.
When that pause expired on July 31, a 25% reciprocal tariff took effect. Then things got worse. On August 27, Trump imposed an additional 25% tariff on imports from India for its continued purchases of Russian oil. The effective rate hit a punishing 50%, among the highest levied on any US trading partner.
The damage was swift and measurable. Indian goods exports to the US fell 37.5% between May and September 2025. They dropped from $8.8 billion to $5.5 billion monthly. The gems-and-jewellery sector saw exports collapse from $500 million in May to just $203 million in September.
Auto components, which send roughly 29% of output to the US, saw margins squeezed as buyers demanded cost absorption. Textile hubs in Tirupur and Surat halted production lines entirely. The US tariffs affect Indian goods across nearly every merchandise category.
A diplomatic sprint in early February 2026 produced a framework deal. India agreed to lower trade barriers, and Trump cut the reciprocal tariff to 18%. But on February 20, 2026, the US Supreme Court ruled 6-3 that the president lacked authority to impose tariffs under IEEPA. This invalidated the entire reciprocal tariff architecture overnight.
Trump pivoted to a 10-15% temporary surcharge under Section 122 of the Trade Act of 1974. As of late February 2026, Indian goods still face this surcharge plus 50% duties on steel and aluminium. Negotiations remain paused, and uncertainty reigns.
Service exports powered through the storm
Against this chaos, India's service economy posted record after record. Total service exports reached $387.5 billion in FY2025, up from $341 billion the year before. In the April-November 2025 window alone, services generated $270 billion. That pace points toward roughly $430-440 billion for full-year FY2026.
Services now account for 46.9% of India's total exports, approaching parity with merchandise exports for the first time. India's service exports for 2026 are on track to set yet another all-time high.
The IT sector drives this engine. NASSCOM's Strategic Review, released February 24, 2026, pegged total tech industry revenue at $297 billion for FY2025. It projected $315.4 billion for FY2026, crossing the $300 billion milestone for the first time.
Tech exports alone should exceed $246 billion in FY2026, growing 5.6% even as global macro conditions tighten. Engineering R&D leads segment growth at 7.7%. Business process management follows at 7%, reflecting a shift toward higher-value work.
The US remains the single largest market, absorbing 54.1% of India's IT exports. Europe accounts for 30.8%. Computer and business services account for roughly 70% of total service exports. India's services trade surplus swelled to $188.6 billion in FY2025. This cushion offset a significant chunk of the merchandise trade deficit and kept the current account manageable.
Why tariffs cannot reach digital services
The immunity of services from tariffs is not a loophole. It is a fundamental feature of international trade law. Tariffs exist under the GATT framework, which governs merchandise trade. Customs authorities assess duties on physical goods that cross a border using standardised valuation methods.
Services fall under the General Agreement on Trade in Services (GATS), which contains no tariff mechanism whatsoever. Trade barriers for services take entirely different forms: licensing requirements, nationality restrictions, and regulatory approvals. But never customs duties.
When an Indian software engineer delivers code to a US client, the deliverable crosses the border as an electronic transmission. There is no shipping container to inspect. No bill of lading to stamp. No port of entry where a customs officer could apply a duty. This makes digital services tariff-free by their very nature.
Reinforcing this structural immunity is the WTO Moratorium on Customs Duties on Electronic Transmissions. Maintained since 1998, it was most recently renewed at the MC13 ministerial in Abu Dhabi in March 2024. Even if this moratorium lapses, over 140 WTO member nations have signalled continued commitment to duty-free digital trade. Major FTAs like USMCA and CPTPP have permanently embedded the principle.
If you are an IT professional or firm looking to tap into this tariff-free corridor, here is a step-by-step guide to exporting IT services to the USA.
The GCC boom is rewriting India's role in global business.
One of the most powerful structural shifts behind India's service export story is the explosive growth of Global Capability Centres in India. As of late 2025, India hosts 1,700 to 2,100-plus GCCs employing approximately 1.9 to 2.0 million professionals. These centres generate $64.6 billion in annual revenue and represent more than half of all GCCs worldwide.
The pace of new establishments is striking. Roughly 110 new GCCs launched between 2024 and 2025. Google inaugurated its 1.6 million-square-foot Ananta campus in Bengaluru. Vanguard is building what will become its largest tech centre worldwide in India. JPMorgan Chase, Goldman Sachs, and Walmart operate some of their biggest offshore units here.
GCCs have evolved far beyond cost-arbitrage back offices. They now function as strategic innovation hubs, spanning product development, AI research, cybersecurity operations, and engineering R&D. The sector is projected to reach $100 billion in revenue by 2030 and employ 2.5 to 2.8 million professionals.
Karnataka became the first state to launch a dedicated GCC policy in November 2024, aiming to establish 500 new centres by 2029. The Union Budget 2026 sweetened the deal further with a uniform 15.5% safe-harbour margin for transfer pricing. This covers over 1,000 existing GCCs.
A paradox of US immigration policy is accelerating this trend. H-1B approvals for India's top seven IT firms fell to a decade-low of 4,573 in FY2025, a 70% decline from 2015. The Trump administration's $100,000 fee on new H-1B petitions made onsite staffing prohibitively expensive. The result is a talent reversal. FAANG companies added roughly 33,000 workers in India in 2025 alone, an 18% increase. What the visa wall blocks, the GCC pipeline absorbs.
India's 15 million freelancers are the tariff-proof frontline.
India is the world's second-largest freelancing economy with an estimated 15 million-plus freelancers earning from international clients. Indian freelancers drive 13.4% of Upwork's global revenue. The freelance platform market in India is growing at a 24% CAGR through 2030.
These individuals represent the most direct embodiment of tariff-proof exporting. A web developer in Jaipur billing a US client faces zero customs friction. A UI/UX designer in Kochi delivering assets via Figma encounters no border checkpoint. Indian freelancers' international payments flow through digital rails that no tariff wall can intercept.
The cost advantage is enormous. Indian IT professionals deliver work at 50-70% lower cost than their US counterparts. A senior software engineer earns $40,000 to $50,000 in India versus $150,000 to $180,000 in the US. Factor in India's 265 million English speakers, a UTC+5:30 time zone enabling follow-the-sun development, and the world's cheapest mobile data at roughly $0.10 per GB. The structural advantages compound quickly.
India's digital infrastructure has matured rapidly. Over 900 million Indians are now online. The country completed the world's fastest 5G rollout, covering 85% of the population in just 22 months. India produces 2.55 million STEM graduates annually and contributes 23% of the global software engineering talent pool. With 159,000-plus DPIIT-recognised startups and 125-plus unicorns, the ecosystem feeding service exports is deep and self-reinforcing.
To make the most of this structural advantage, freelancers should explore the best ways to receive international payments in India without losing earnings to hidden fees.
Policy tailwinds and persistent headwinds
The Indian government has broadly aligned its policy to support service exporters. The GST framework zero-rates export services. Freelancers and firms can file a Letter of Undertaking to export without paying GST. Section 44ADA offers presumptive taxation at 50% of gross receipts for professionals earning up to ₹75 lakh.
The RBI extended the FEMA export realisation period from 9 to 15 months in November 2025. It also opened foreign currency accounts at GIFT City for exporters. The India-UK CETA, signed in July 2025, committed to market access for 137 service sub-sectors. It exempts Indian workers from UK social security contributions for up to three years, saving an estimated ₹4,000-plus crore annually.
However, significant challenges persist. Digital services taxes in the UK at 2%, France at 3%, and Italy at 3% create compliance complexity for Indian service providers. Data localisation rules under the EU's GDPR constrain cross-border data flows since India lacks adequacy status. Visa freezes at US consulates, with no H-category appointments available until May 2027, forcing costly workarounds for onsite work components.
Currency volatility creates revenue unpredictability for small exporters who lack hedging capabilities. The compliance burden for solo freelancers also remains heavy. GST registration, FEMA Softex forms, quarterly advance tax, and mandatory ITR-3 filing all add overhead that larger firms absorb more easily.
The road to $500 billion runs through AI and services
The trajectory ahead is steep but credible. NASSCOM projects the tech industry will hit $315 billion in FY2026 and keep compounding. Goldman Sachs estimates India's total services exports could reach approximately $800 billion by 2030. The government targets $1 trillion in combined services exports as part of a $2 trillion total export goal by 2030.
AI is both the greatest accelerator and the most serious structural risk. Over 80% of Indian enterprises are actively building autonomous AI agents and moving from experimentation to production. India added 5.2 million new developers in 2025, accounting for one in three of the new developers globally. It ranks second worldwide in contributions to public GenAI projects.
New high-value service categories like AI/ML engineering, cloud architecture, cybersecurity, and fintech analytics are growing faster than traditional IT outsourcing. NASSCOM estimates AI-related services could contribute $30-50 billion in incremental revenue over the next three to five years.
Yet the AI transition demands massive reskilling. An estimated 5.7 million IT employees face retraining requirements. India's R&D spending remains low at 0.7% of GDP, well below innovation leaders. Competition is intensifying from Vietnam, the Philippines, and Eastern Europe. The winners will be those who climb the value chain from cost arbitrage to intellectual property creation and complex consulting.
The US-India tariff saga of 2025-2026 has been a brutal stress test for merchandise exporters. But it has also highlighted the extraordinary structural advantage of India's service economy. Services are constitutionally immune to tariffs under international trade law. India's $387.5 billion service export machine, powered by 1,900-plus GCCs, 5.9 million tech workers, and 15 million freelancers, operated at full throttle while goods exporters scrambled to survive 50% duties. For Indian professionals, freelancers, and service businesses, the message is clear. The tariff war is someone else's problem. Your competitive moat just got wider.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial or legal advice. Winvesta makes no representations or warranties about the accuracy or suitability of the content and recommends consulting a professional before making any financial decisions.
Get paid globally. Keep more of it.
No FX markups. No GST. Funds in 1 day.
