The Finance Act, 2026 has introduced a landmark change to the IGST Act, 2017, fundamentally altering how intermediary services are taxed in cross-border transactions. Effective 30 March 2026, the omission of Section 13(8)(b) shifts the place of supply for intermediary services from the supplier's location to the recipient's location — unlocking zero-rated export benefits and ending nearly a decade of costly litigation.
Understanding Intermediary Services: The Foundation
Before examining the amendment, it is essential to understand what constitutes "intermediary services" under GST law and who is affected by this change.
The key distinguishing feature is that an intermediary acts as a facilitator — not as a principal. The intermediary does not supply the underlying goods or services on its own account; instead, it arranges the transaction between two other parties and earns commission or fee for doing so.
Commission Agents
Agents who receive commission from foreign counterparts for facilitating supply or procurement of goods and services qualify as intermediaries under the GST law.
Indenting Agents
Indenting agents operating on behalf of overseas principals who source goods or services from Indian suppliers are squarely covered under the intermediary definition.
Trade Facilitators
Any person who arranges and facilitates supply between two parties — without owning the goods or delivering the service themselves — falls within the intermediary category.
Platform Intermediaries
Digital platforms and marketplace aggregators that connect buyers and sellers without supplying the underlying product on their own account may qualify as intermediaries.
What's Changing? Old Rule vs. New Rule
The amendment represents a fundamental reversal in how the place of supply is determined for intermediary services in cross-border transactions.
The Old Rule — A Supplier-Centric Approach
Previously, Section 13(8)(b) of the IGST Act mandated that the place of supply for intermediary services was always the location of the supplier, regardless of where the recipient was located. This created a unique exception to the general principles governing service taxation and meant that Indian intermediaries serving foreign clients were invariably taxed in India — even when the economic substance of the transaction was entirely outside India.
(Always India — GST Applies)
w.e.f. 30-03-2026
(Outside India — Zero-Rated)
The New Rule — Destination-Based Approach
With the omission of Section 13(8)(b) via Clause 157 of the Finance Act, 2026, intermediary services now follow the default provisions under Section 13(2) of the IGST Act. Under this section, the place of supply is determined as:
| Parameter | Before Amendment | After Amendment |
|---|---|---|
| Governing Provision | Section 13(8)(b) — Special Rule | Section 13(2) — Default Rule |
| Place of Supply | Location of Supplier (always India) | Location of Recipient (outside India if foreign client) |
| GST Applicability | GST levied even on foreign-recipient transactions | No GST — qualifies as export of services |
| ITC Refund | Not available (blocked) | Available (zero-rated supply) |
| LUT Requirement | Not applicable | Required before issuing export invoice |
| Effective Date | GST inception — July 2017 | 30 March 2026 |
Why This Matters: The Export Opportunity
This seemingly technical change has profound practical implications for Indian intermediaries serving foreign clients, opening up export benefits that were previously unavailable.
Qualifying for Export of Services
When an Indian intermediary provides services to a recipient located outside India, the place of supply now shifts outside India. This is crucial because it satisfies one of the key conditions required for classification as "export of services" under Section 2(6) of the IGST Act.
Compliance Steps for Indian Intermediaries
End of Long-Standing Controversies: A Major Relief
The special place of supply rule under Section 13(8)(b) had been a major source of litigation and disputes since GST implementation in 2017. The amendment removes not just the provision but the entire legal basis for these controversies.
The Litigation Landscape Under the Old Law
Two primary categories of disputes dominated the intermediary services litigation landscape:
Classification Disputes
Tax authorities and taxpayers frequently disagreed on whether a particular service qualified as an intermediary service or should be treated as a principal-to-principal supply. Reclassification by authorities often resulted in large tax demands with interest and penalty.
Place of Supply Disputes
Even when a service was accepted as intermediary service, disputes arose regarding the application of Section 13(8)(b) — particularly in cases where services were partially performed outside India or involved multi-party arrangements.
Alignment with the Destination Principle of GST
This amendment represents more than just a procedural change — it corrects a fundamental inconsistency in India's GST framework for cross-border services.
The destination principle, which forms the foundation of GST, mandates that tax is levied where consumption occurs. GST is designed as a consumption-based tax, and goods or services consumed outside India should not bear Indian GST — a globally recognised standard for indirect taxation that India follows for virtually all other service categories.
Section 13(8)(b) was an anomaly — an artificial deeming provision that located the place of supply in India even when the service was consumed abroad. By removing it, the government has eliminated this anomaly and created parity between intermediary services and other cross-border service transactions.
| Service Category | Place of Supply Rule | Export Benefit |
|---|---|---|
| IT / Software Services | Recipient Location (Sec 13(2)) | ✅ Available |
| Consulting Services | Recipient Location (Sec 13(2)) | ✅ Available |
| Legal / Accounting Services | Recipient Location (Sec 13(2)) | ✅ Available |
| Intermediary Services (Old) | Supplier Location (Sec 13(8)(b)) | ❌ Not Available |
| Intermediary Services (New) | Recipient Location (Sec 13(2)) | ✅ Now Available |
The Reverse Impact: Import of Services and RCM
The amendment works symmetrically. While it benefits Indian intermediaries serving foreign clients, it also has important implications for Indian businesses that receive intermediary services from foreign providers.
When a foreign intermediary provides services to an Indian recipient, the transaction will now be classified as import of services. In such cases, the Indian recipient will be liable to pay GST under the Reverse Charge Mechanism (RCM).
Indian Intermediary → Foreign Client
Place of supply: Outside India. Qualifies as export of services. Zero-rated supply. LUT required. ITC refund available. No GST to be charged on invoice.
Foreign Intermediary → Indian Client
Place of supply: India (recipient location). Classified as import of services. Indian recipient liable for IGST under RCM. Input credit of RCM tax available subject to conditions.
Conclusion
The amendment to Section 13 of the IGST Act, effective 30 March 2026, represents one of the most significant reforms in India's cross-border services taxation since GST implementation. By eliminating the supplier-location rule for intermediary services and adopting the destination principle, this change creates a level playing field for Indian intermediaries in the global marketplace.
Businesses must act immediately — review contracts, apply for LUT, update compliance systems, train teams, and implement robust documentation processes. Those who act swiftly will gain first-mover advantages in newly accessible export markets, while those who delay risk non-compliance penalties and missed refund opportunities.
The Finance Act, 2026 ends nearly a decade of uncertainty for Indian intermediaries operating in global markets. By aligning intermediary services with the destination principle that governs all other cross-border services, India has taken a decisive step towards a more equitable, internationally competitive indirect tax framework. Indian commission agents, indenting agents, and trade facilitators can now approach global markets with confidence — their services are exports, their ITC is refundable, and their tax position is unambiguous.
— APMH Consulting Advisory Desk | Chartered Accountants & GST Specialists | www.apmhconsulting.com