For years, Indian businesses providing intermediary services to overseas clients faced an unusual GST outcome. Even where the recipient was located outside India and payment was received in foreign exchange, the transaction could still be taxed in India, denying export status and the related GST benefits.
That position has now changed.
What the Earlier Rule Provided
- Section 13(8)(b) of the IGST Act deemed the place of supply for intermediary services to be the location of the supplier, that is, India, regardless of where the recipient was based.
- Many marketing support, liaison, and facilitation services provided to overseas clients were treated as taxable in India despite serving foreign recipients exclusively.
What Has Changed
- The Finance Act, 2026 has omitted Section 13(8)(b) of the IGST Act with effect from 30 March 2026.
- Intermediary services now fall under the general place of supply rule under Section 13(2), where the location of the recipient becomes relevant.
- Where the recipient is outside India and the other export conditions are satisfied, the supply may now qualify as an export of services.
Who Is Most Affected
- IT and ITES companies and Global Capability Centres.
- Marketing support and business facilitation firms.
- Consulting and advisory businesses serving overseas clients.
What This Means
Businesses that previously treated intermediary services as taxable domestic supplies should reassess their GST position for services rendered on or after 30 March 2026. The amendment brings long-awaited certainty for cross-border service providers. However, it operates prospectively and does not automatically resolve pending disputes, assessments, or refund claims relating to earlier periods.