Intermediary services have historically been denied export benefits under GST due to a specific place of supply rule. This comprehensive guide explains why, the impact of the recent amendment, and the current compliance requirements.
What Are Intermediary Services?
Intermediary services include services provided by a broker, agent, or any other person who arranges or facilitates the supply of goods or services between two or more persons, but does not include a person who supplies such goods or services on his own account.
Examples include:
- Commission agents
- Brokers
- Facilitators
- Matchmakers
- Any person arranging or facilitating a supply
Why Intermediary Services Denied Export Benefit
The Problem: Section 13(8)(b) of the IGST Act
Prior to the Finance Act 2026, Section 13(8)(b) of the IGST Act deemed the place of supply of intermediary services to be the location of the supplier. This meant that even if the intermediary provided services to a recipient outside India, the place of supply was in India.
The Consequence
The classification of a service as "intermediary" frequently resulted in denial of export benefits. Such transactions attracted GST at 18%. Suppliers in India providing intermediary services to recipients abroad were being denied export benefits. This increased the tax cost for the foreign clients availing services from the Indian intermediaries.
The Finance Act 2026 Amendment: A Game Changer
The Amendment
The Finance Act 2026 finally ended this anomaly by removing Section 13(8)(b) of the IGST Act.
What Changed
With this amendment, the place of supply for intermediary services now shifts to the recipient's location instead of the supplier's location. The general rule under Section 13(2) now applies, which states that the place of supply is the location of the recipient.
Effective Date
The amendment is effective from 30 March 2026. Only the portion with a time of supply on or after 30 March 2026 qualifies for zero-rating.
Impact of the Amendment
Outward Intermediary Services
Intermediary services provided to recipients outside India are now treated as exports, making them eligible for zero-rated GST treatment. Outward intermediary services to overseas clients may now qualify as exports (subject to receipt in foreign exchange and non-related party conditions), enabling zero-rated benefits. The supplier of service shall have two options: export with payment of IGST (and claim refund) or export without payment of IGST (under LUT).
Inward Intermediary Services
Services received from foreign intermediaries will now attract GST against which ITC can be claimed.
Who Benefits
This shift ensures that intermediary services provided to overseas clients can now qualify as exports, benefiting IT companies, Global Capability Centres (GCCs), consulting, BPO, and digital service providers. The move aligns the place of supply with the recipient's location, granting export status and benefits to these service providers.
Transitional Challenges
Businesses must ensure that the time of supply falls on or after 30 March 2026 to qualify for the new treatment. For transactions straddling the effective date, careful documentation is required.
Common Mistakes to Avoid
Mistake 1: Not applying the amendment for transactions on or after 30 March 2026.
Mistake 2: Continuing to treat intermediary services as domestic supplies.
Mistake 3: Not satisfying the export conditions even after the amendment.
Mistake 4: Not maintaining proper documentation for the transition period.
Best Practices
Apply the Amendment: Apply the Finance Act 2026 amendment for intermediary services with time of supply on or after 30 March 2026.
Satisfy Export Conditions: Ensure all conditions for export (foreign exchange receipt, etc.) are satisfied.
Maintain Documentation: Keep records of the time of supply and place of supply determination.
Seek Professional Guidance: Intermediary services have complexities; professional advice is recommended.
Intermediary services historically denied export benefits due to Section 13(8)(b). With the Finance Act 2026 amendment, these services now qualify for zero-rated treatment, subject to conditions.
Need help with intermediary services GST compliance? Our GST experts provide comprehensive advisory and support.
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