New Bill Poses Threat to U.S. IT Industry; Could Also Impact Kerala

The “Halting International Relocation of Employment Act 2025” (HIRE Act 2025), introduced in the U.S. with the aim of imposing higher taxes on foreign services, could pose a major challenge to India’s IT industry — particularly Kerala’s technology sector, experts warn.

The bill, tabled by U.S. Senator Bernie Moreno, proposes a 25% excise tax on foreign services while also eliminating the current 21% tax exemptions. If enacted, this could raise the cost of services by up to 46%.

Such a law would significantly impact Indian IT giants like TCS, Infosys, and Wipro, which rely heavily on the U.S. market, accounting for nearly 60% of India’s IT revenue. Freelancers and startups would also face difficulties.

Major U.S.-based firms with strong operations in India — including IBM, Accenture, Cognizant, Microsoft, Google, and Amazon — would be affected. Of the 1,800+ Global Capability Centers (GCCs) operating in India, about 65% belong to U.S. companies, playing a crucial role in R&D and strategic operations.

Kerala’s IT hubs — Technopark, Infopark, and Cyberpark — along with companies such as UST and IBS Software, and many startups dependent on U.S. clients, would also be vulnerable. This could threaten both Kerala’s tech ecosystem and its export-driven economy.

However, experts believe the bill faces hurdles in becoming law, as it would require approval from the U.S. Congress, Senate, and President. Moreover, U.S. companies cannot meet all labor needs domestically, making outsourcing essential. India and other countries are also expected to lobby strongly against the bill and seek policy concessions.

Improved ties with China may not ease this crisis, since China has minimal presence in Kerala’s IT sector. Analyst Tony Thomas argues that Kerala should proactively collaborate with Indian trade bodies to lobby for exemptions that would protect its IT industry.