GST on Intermediary Services After Section 13(8)(b) Omission From 30 March 2026

Summary: The omission of Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017, by Section 157 of the Finance Act, 2026, effective 30 March 2026, changes the place-of-supply treatment of intermediary services involving overseas suppliers or recipients. Previously, the place of supply of intermediary services was deemed to be the supplier’s location, so an Indian intermediary serving an overseas client generally failed the place-of-supply condition for export of services. Following the omission, the general rule under Section 13(2) ordinarily applies, subject to any other specific applicable provision, and places the supply at the recipient’s location. The statutory definition of an intermediary under Section 2(13) remains unchanged. Accordingly, distinguishing the arrangement or facilitation of another person’s supply from services provided on one’s own account remains essential. CBIC Circular No. 159/15/2021-GST explains the relevance of three parties, two distinct supplies and the actual contractual arrangement. The change does not automatically make every overseas transaction an export: all conditions of Section 2(6), including permitted receipt of consideration and the distinct-establishment restriction, must be satisfied. Conversely, services obtained from foreign intermediaries by Indian recipients may now attract IGST under reverse charge where the import-of-services conditions and applicable charging provisions are met. Earlier-period assessments, refund claims and litigation require separate examination because the amendment is not expressly retrospective.

Indian companies arranging sales or services between foreign principals and customers frequently face questions about whether their activities constitute intermediary services or independent services supplied on their own account. That distinction continues to matter even after the omission of Section 13(8)(b), although the place-of-supply consequences have changed from 30 March 2026.

Who Qualifies as an Intermediary Under Section 2(13) of the IGST Act?

Section 2(13) of the IGST Act covers a broker, agent or other person who arranges or facilitates a supply of goods, services or securities between two or more persons. It excludes a person supplying those goods, services or securities on their own account.

The legal inquiry is not decided merely by describing a contract as a consultancy, marketing or support agreement. Under CBIC Circular No. 159/15/2021-GST, the essential indicators include an identifiable principal supply between other persons, a separate facilitation service and the intermediary’s role in arranging that principal supply. An independently contracted service provider performing its own service is not an intermediary merely because its customer uses that service in another commercial transaction.

How the Place of Supply Changed on 30 March 2026

Position Before the Omission

Former Section 13(8)(b) placed the supply of intermediary services at the location of the supplier. Thus, an Indian intermediary facilitating a transaction for an overseas recipient generally could not satisfy the requirement that the place of supply be outside India for an export of services. The precise levy and classification of such transactions remained subject to the applicable IGST and CGST provisions and judicial interpretations.

Position After the Omission

Section 157 of the Finance Act, 2026 omitted Section 13(8)(b), effective 30 March 2026. In the absence of another specifically applicable rule, Section 13(2) ordinarily determines the place of supply by reference to the recipient’s location. The change affects both Indian intermediaries serving overseas recipients and Indian businesses engaging overseas intermediaries.

When Do Intermediary Services Qualify as Exports?

The place of supply being outside India is necessary but not sufficient. Under Section 2(6) of the IGST Act, all five conditions must be satisfied:

1. The supplier of the service is located in India.
2. The recipient is located outside India.
3. The place of supply is outside India.
4. Payment is received in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India.
5. The supplier and recipient are not merely establishments of a distinct person as specified in Explanation 1 to Section 8.

Where these requirements are met, the supply may qualify as a zero-rated export, subject to the applicable provisions governing a letter of undertaking, payment of IGST, input tax credit and refunds. Businesses should preserve contracts, invoices, remittance evidence and documentation identifying the actual recipient.

GST Implications for Indian Businesses Using Foreign Intermediaries

The change also affects inward services. Where an intermediary located outside India supplies facilitation services to a recipient in India, the place of supply may now be India under Section 13(2). If the transaction meets the definition of import of services and the relevant charging provisions apply, the Indian recipient may be liable to pay IGST under the reverse charge mechanism. Eligibility for input tax credit must be examined independently. The arrangement should not be treated as taxable solely because the overseas provider is called an agent; its actual activities and the applicable statutory conditions remain decisive.

Why Earlier-Period Disputes and Classification Questions Continue

Transactions Before 30 March 2026

The legislative omission is not expressly retrospective. Notices, appeals and refund disputes concerning earlier supplies must therefore be evaluated under the law applicable to the relevant period, the nature of the services and any binding judicial decisions. The amendment alone should not be treated as automatically extinguishing historic demands or creating refund entitlement. See the discussion of retrospective impact and pending intermediary-service disputes.

Own-Account Services Versus Facilitation

The intermediary definition remains unchanged. A contract may involve independent deliverables, agency functions or both. The parties’ responsibilities, invoices, flow of consideration and relationship with the ultimate customer should be assessed in substance. CBIC’s intermediary clarification is relevant guidance but cannot replace examination of the actual contract and conduct.

Practical Contract and Compliance Checks

• Identify the principal supply, the parties to that supply and the recipient of the Indian entity’s own service.
• Determine whether the Indian entity facilitates another supply or performs its own independent service.
• Review who contracts with the end customer, issues invoices, fixes prices and bears responsibility for performance.
• Check whether consideration is commission-based or linked to separately defined deliverables, without treating payment structure as conclusive.
• Verify the location of the recipient, permitted payment currency and all conditions for export of services.
• For overseas intermediaries engaged by Indian businesses, evaluate import-of-services and reverse-charge implications.
• Review contracts and tax positions separately for periods before and from 30 March 2026, including pending audits, appeals and refund claims.

Conclusion

The omission of Section 13(8)(b) from 30 March 2026 removes the former supplier-location rule for intermediary services and ordinarily brings them within the recipient-location rule under Section 13(2). It improves the potential export position of qualifying Indian intermediary services, but does not remove the need to satisfy every condition of Section 2(6). It may also create reverse-charge implications for Indian recipients of foreign intermediary services. Since the definition of intermediary remains unchanged, sound contractual analysis and period-specific compliance reviews remain essential.

Author: N. Sudheer, M.Com., FCS, LL.B., Partner, A2 Consultants, Hyderabad.