Pursuant to GST Council recommendations, the place of supply (POS) for intermediary services has been amended effective 30 March 2026, shifting from the supplier’s location to the recipient’s location. This change alters taxability significantly: 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, while inward services from overseas suppliers will be treated as imports and taxed under reverse charge mechanism (RCM). The amendment does not trigger Section 14 of the CGST Act, as it involves a change in taxability rather than tax rate. Instead, taxability is determined based on time of supply, generally the earlier of invoice date, service provision, or payment receipt. Transactions before 30.03.2026 follow old rules, while those after follow new POS provisions. Transitional risks arise in cases like advances, prior invoices, and continuous contracts, making accurate time-of-supply determination essential.
1. Background
Pursuant to the recommendations of the GST Council, the place of supply (“POS”) for intermediary services has been amended (effective 30 March 2026) from location of supplier to location of recipient. This results in a fundamental shift in taxability:
In case of outward intermediary services may now qualify as export of services.
In case of Inward intermediary services will qualify as RCM (import of services).
Here, a time of supply–driven approach is critical to determine the applicable tax position for transactions spanning the transition date.
2. Outward Intermediary Services (India supplier of service to Overseas Client)
a. Post-Amendment Position:- Where intermediary services are provided to a recipient located outside India, Place of Supply of Service will be Place outside India and it will be treated as Export of services, subject to conditions that,
i. Consideration is received in convertible foreign exchange (or permitted INR)
ii. Supplier and recipient are not merely establishments of a distinct person
b. Tax Implications: – Outward Supply becomes zero-rated and supplier of service shall have two options,
i. Supply under LUT (without payment of tax), or
ii. Pay tax and claim refund
3. Inward Intermediary Services (Overseas Supplier to India Recipient)
a. Post-Amendment Position:- Where intermediary services are received from a supplier located outside India, Place of supply of services will be the location of recipient of service, i.e. India and it will be treated as Import of Service .
b. Tax Implications: –
i. Liability to pay GST is under Reverse Charge Mechanism (RCM)
ii. IGST payable by recipient in India
iii. ITC available subject to eligibility (Sec 16(2)) and usage (Sec 17(5))
4. Time of Supply – Governing Principle
Whether Section 14 (Change in Rate) will be applicable in the case?
Section 14 of CGST Act 2017, The amendment results in a change in POS and consequent taxability, and not a change in tax rate. Accordingly, Applicability of provisions relating to “change in rate of tax” is not triggered
Applicable Provision: – Though the provisions of Sec 14 of CGST act 2017 are not applicable. However, Taxability should be determined based on time of supply for services. And generally, be the earlier of:
i. Date of invoice (if issued within prescribed time), or Date of provision of service, or
ii. Date of receipt of payment (in specified cases)
Cut-off Based Analysis. for Outward Intermediary Supplies
i. Time of supply before 30.03.2026:- Old Place of Supply provision applies (India) and Supply taxable in India.
ii. Time of supply on/after 30.03.2026:- New POS applies (outside India) and Eligible as export (subject to conditions)
Inward Supplies (RCM)
Applicable provision: – Time of supply under RCM is generally, Earlier of date of payment, or 60 days from invoice date.
Cut-off Based Analysis. for Inward Intermediary Supplies
i. Time of supply before 30.03.2026:- Not treated as import (based on earlier POS position).
ii. Time of supply on/after 30.03.2026 :- Treated as import and GST payable under RCM
5. Transition Risk Areas: – Attention is required in case of
i. Advances received prior to 30.03.2026,
ii. Invoices issued prior to the amendment date
iii. Continuous / milestone-based service contracts
iv. Back-to-back arrangements involving overseas parties
In all such cases, time of supply determination will be decisive for taxability.
6. Conclusion
The amendment aligns the GST framework with destination-based taxation principles and resolves longstanding issues relating to intermediary services.
However, given the absence of specific transitional provisions, a disciplined, time of supply–based approach is essential to ensure defensible positions and mitigate exposure.
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