Potential US Tariffs on Software Exports Spark Anxiety in India’s $283 Billion IT Sector

New Delhi, September 7: India’s information technology industry is on edge over the prospect of US tariffs on software exports, a move that experts warn could disrupt the country’s most lucrative services sector. The United States accounts for more than 60% of revenue for India’s $283 billion outsourcing industry, which includes giants such as Tata Consultancy Services, Infosys, HCLTech, and Wipro.

While the US administration has yet to make a formal announcement, concerns were triggered after Peter Navarro, senior trade adviser to President Donald Trump, amplified a social media post calling for tariffs on outsourced services and remote foreign workers. The proposal, if implemented, could have sweeping implications for Indian IT exports, which form the backbone of the country’s technology economy.

Risk of Dual Taxation and Rising Costs
Analysts caution that tariffs on software services could amount to dual taxation, as Indian IT companies already pay significant taxes in the United States. Additional restrictions on visas could further raise operational costs, forcing companies to expand local hiring in the US or shift delivery to costlier neighbouring regions.

Yugal Joshi, partner at Everest Group, noted: “These companies pay significant taxes in the US and therefore, the tariff will be double taxation… It will further harm growth of India-based service providers and even GCCs, if they are tariffed too.”

Political Messaging or Policy Shift?
Industry experts, however, believe the discussion may be more political posturing than a concrete policy proposal. Phil Fersht, CEO of HFS Research, observed that taxing “digital labour flows” is far more complex than imposing duties on physical goods. “The US depends heavily on India’s IT and engineering talent, whether onsite through H-1B visas or offshore through remote delivery, to keep its own technology economy competitive,” he said.

Fersht also pointed out that influential US tech leaders, many of whom are deeply reliant on Indian talent and market access, continue to exert significant sway over the Trump administration.

Sector Already Under Pressure
The tariff fears come at a time when India’s IT sector is grappling with global economic uncertainty, softening demand, and the rapid adoption of AI-driven automation. Any additional trade barriers could erode profit margins and deepen the challenges facing service providers.

Although no formal policy has been outlined, the mere prospect of tariffs has heightened uncertainty across the sector, underscoring its vulnerability to shifts in US trade policy.