India risks losing tax revenue by delaying global minimum tax rollout

Apple's latest annual report contains a revealing disclosure. Singapore's Qualified Domestic Minimum Top-up Tax (QDMTT) increased the company's FY2026 I-T provision by $2.51 bn, contributing about 1.6 percentage points to its global effective tax rate of 17%. Yet, Singapore's lower tax rate relative to 21% US federal rate, including incentives, simultaneously reduced Apple's tax provision by $5.49 bn. The disclosure illustrates how Pillar Two - the international tax framework established by OECD and G20 that enforces a global minimum ETR of 15% on large MNCs with consolidated annual revenues of at least 750 mn - is beginning to reshape distribution of international corporate tax revenues.

Singapore has secured additional revenue from profits taxed within its jurisdiction, while continuing to offer investment incentives. India, despite participating in OECD-G20 negotiations, has yet to implement Pillar Two. Is it sacrificing revenue by failing to introduce its own domestic minimum tax?

QDMTT allows the jurisdiction where low-taxed profits arise to collect top-up tax before another jurisdiction exercises taxing rights through Income Inclusion Rule (IIR), or Undertaxed Profits Rule (UTPR). Consider an MNC's Indian operations generating 100 mn of GloBE (global anti-base erosion) income at an effective tax rate of 10%. Ignoring exclusions and adjustments, the resulting 5-percentage-point shortfall could produce 5 mn in additional tax.


If India imposed QDMTT, the revenue would accrue to India. Without one, another jurisdiction could collect it under the applicable Pillar Two rules, unless the group is US parented and eligible for side-by-side relief. The paradox is evident: India may grant a tax concession to attract investment, only for another government to capture the resulting tax differential.

India's ordinary corporate tax rates suggest its exposure could be limited. Companies electing Sec 115BAA, I-T Act, 1961 (Sec 200, I-T Act, 2025), generally face an effective statutory rate of ~25.17%, while new manufacturing companies under Sec 115BAB (Sec 201, I-T Act, 2025) face ~17.16%. Both exceed Pillar Two minimum.

But statutory rates are not equivalent to GloBE ETRs, which are calculated using adjusted covered taxes and GloBE income on a jurisdictional basis. Grandfathered tax holidays, SEZ concessions, accounting differences and other incentives may produce outcomes requiring closer examination. Conversely, many Indian subsidiaries may have effective rates comfortably above 15%, leaving no additional revenue to collect.

So, the revenue question is whether MNCs earn material amounts of Indian income that remains below GloBE minimum after the prescribed adjustments.

India has committed substantial fiscal resources to attracting strategic investments. These incentives pursue legitimate industrial objectives like employment, tech transfer, infra development and integration into global supply chains. But conventional profit-based tax concessions like a tax holiday until 2047 for foreign cloud service providers using Indian data centres may become less effective under Pillar Two.

This raises a fundamental question about design of India's industrial policy. Direct expenditure subsidies - the form much of India's semiconductor support already takes - properly structured refundable credits, and other qualifying investment incentives may preserve more intended economic benefit than traditional tax holidays.

OECD's January 2026 side-by-side package, including its new Substance-Based Tax Incentive (SBTI) safe harbour, makes this review particularly timely, since it covers expenditure-based incentives, not profit-based tax holidays. India should examine whether its existing incentives are achieving their objectives, or merely reallocating taxing rights to other governments.

India should begin by conducting a revenue-impact assessment using its Country-by-Country Reporting (CbCR) and other available tax data to establish the number of potentially affected Indian and foreign MNCs, scale of Indian profits exposed to top-up taxation, and likely revenue after exclusions, safe harbours and administrative costs.

The study should also separate two categories of top-up tax:

1. Revenue that foreign jurisdictions can already collect. This includes UTPR top-up tax on low-taxed profits of Indian-parented groups. India applies no IIR, and the transitional UTPR safe harbour that protected such groups expired on December 31, 2025.
2. Revenue that no jurisdiction currently collects, like top-up tax on US-parented groups that qualify for side-by-side relief.

A carefully designed QDMTT could then be considered alongside a review of existing investment incentives, with particular attention to simplicity, certainty and preserving legitimate industrial policy objectives. India's high corporate tax rates may substantially limit amounts involved.

Nor does every instance of low taxation necessarily translate into a foreign tax collection, particularly following the side-by-side agreement. But neither should the opportunity be dismissed without examination.

India's decision to delay Pillar Two implementation may preserve policy flexibility. But it also means relinquishing revenue a domestic minimum tax could otherwise secure.

The writer is former principal DG,I-T (administration), New Delhi