New Delhi, Sept. 10 -- Amid mounting geopolitical tensions and tariff wars, a new US bill has sparked concerns for the $280 billion IT services industry in India. Called the Halting International Relocation of Employment (HIRE) Act Bill, it is touted as a protectionist measure by seeking to penalise service outsourcing.
What is the HIRE Bill
The HIRE Bill was introduced in the Senate by Ohio Republican Senator Bernie Moreno. Primarily, the bill proposes a 25% excise tax on any payments made by U.S. companies to foreign entities or workers for services that are consumed by the US consumers. This applies to fees such as service charges, royalties, or any other labor-related payments to non-U.S. individuals or organisations.
The revenues generated from the excise tax would be directed into a newly established Domestic Workforce Fund, managed under the U.S. Treasury. This fund will finance apprenticeship programs, workforce development, and reskilling initiatives. India's leading IT services providers, such as Tata Consultancy Services, Infosys, Wipro, HCLTech, and Tech Mahindra, drive more than half of their revenues from North America. Some of their clients include Fortune 500 companies like JPMorgan Chase, Microsoft, Verizon, Mattel, among others. Impact on India's IT sector Implications of this tax imposition would be that the US companies pass on less work offshore, or demand price cuts from Indian vendors to offset the new costs. Additionally, IT service providers to stay competitive may have to absorb part of the tax burden, squeezing already thin margins. Nitin Bhatt, EY India's technology sector leader, said that the Act would materially alter the cost structure of global outsourcing. "If enacted, in current or diluted format, it could significantly reshape global delivery economics, potentially increasing costs by up to 60%. With its broadened definition of 'foreign person,' strengthened anti-avoidance provisions, and enhanced compliance requirements, businesses will need to closely assess both financial and operational implications," he said. That said, most experts believe that the bill is unlikely to be passed. For instance, Bhatt argues that the economic interests of U.S. enterprises depend too deeply on global cost arbitrage and innovation at scale. "87% of US tech leaders cannot fill critical AI, cybersecurity, cloud, and software roles, while only 16% believe they have the talent to deliver digital transformation. Meanwhile, developer demand is growing 25% faster than average," Phil Fersht, analyst and founder of HFS Research, wrote on LinkedIn.
"India provides the only workforce at scale to meet this gap, exporting nearly $200B in IT services, with 60% tied to the US. Without this talent, American innovation slows, costs rise, and competitiveness slips. Tariffs won't bring jobs back; they will raise delivery costs, delay transformation, and stall innovation pipelines," he added. Notably, a large chunk of Fortune 500 companies has significant investments in India. Still, the proposal may cause delays in deal finalisations and hesitation in new investments in the short term, as clients reassess risks. To be sure, the Trump administration levied on India some of the world's steepest tariffs - a 25% reciprocal duty on Indian exports, along with an additional 25% levy linked to New Delhi's imports of Russian crude. On Tuesday, US President Donald Trump tweeted on platform X that his administration is engaged in ongoing discussions with India to ease trade barriers, bringing a thaw in the ongoing geopolitical tensions. A meeting between Trump and PM Narendra Modi in the coming times seems likely.
Published by HT Digital Content Services with permission from TechCircle.