Introduction
A long-standing provision in GST has finally been revisited with the omission of Section 13(8)(b) of the IGST Act through the Finance Act, 2026. This provision had, for years, denied export status to intermediary services by deeming the place of supply to be in India, even where services were rendered to overseas clients.
With its removal, intermediary services are now aligned with the general place of supply rule, enabling such services to qualify as exports subject to prescribed conditions. This marks a significant shift in the tax position for cross-border service providers.
Intermediary services finally unlock export benefits from 30th March 2026. While exporters stand to gain from this shift, importers may now face increased exposure under reverse charge, leading to a higher compliance burden. This reform provides a level playing field to Indian intermediaries competing in the global market
This article critically evaluates the legal amendment, its practical implications, and the transitional challenges arising from its implementation.
| Legal Amendment and Effective Date |
Clause 157 of the Finance Act, 2026 omits Section 13(8)(b) of the IGST Act, 2017, thereby eliminating the long-standing anomaly in determining the place of supply for intermediary services.
In the absence of a specifically notified effective date, ambiguity initially arose regarding the applicability of the amendment. However, Section 5 of the General Clauses Act, 1897 provides clarity—where no commencement date is specified, the law becomes effective on the date of Presidential assent.
Accordingly, since Presidential assent was granted on 30 March 2026, the amendment is effective from the same date.
| What are Intermediary Services? |
According to Section 2(13) of the Integrated Goods and Services Tax (IGST) Act 2017, an intermediary is defined as under:
“Intermediary means a broker, an agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services, or both, or securities on his own account.”
In essence, intermediaries act as a conduit for transactions between a supplier and a recipient but do not themselves take possession or ownership of the goods or services involved.
For example, a person who connects buyers and sellers of products without handling of the goods or services, like an online marketplace or travel agency or an agent, is considered an intermediary. The role of the intermediary is limited to facilitating another supply of goods or services between the parties involved.
| What Has Changed? |
The amendment fundamentally alters the place of supply framework for intermediary services:
Earlier Position: Place of supply deemed to be the supplier’s location (India), making such services taxable even when provided to foreign clients.
Revised Position: Place of supply determined under Section 13(2), i.e., the location of the recipient.
This shift ensures that intermediary services provided to overseas clients can now qualify as exports, subject to fulfillment of export of service conditions.
| Impact Analysis |
Changes for Service Providers:
Earlier, despite satisfying all other conditions for export of services, intermediary services did not qualify as exports due to the place of supply being deemed in India under Section 13(8)(b) of the IGST Act, 2017. Consequently, such services provided to foreign recipients were subject to GST, resulting in an additional cost burden for Indian service providers. The omission of this provision is therefore a welcome move, bringing much-needed relief and enhancing their global competitiveness.
Now that this section has been omitted, this enables Indian service providers to qualify as export of services, subject to receipt of consideration in foreign currency and fulfilment of prescribed export of service conditions. Sectors such as IT & ITes, consulting, BPO, and technology support services, including Global Capability Centres (GCCs), will now be positioned to qualify as exporters.
This amendment addresses a legacy issue persisting since the service tax regime and is expected to enhance India’s competitiveness by making exports more cost-efficient.
Changes for Service Recipients:
While the amendment provides relief to exporters, it may have adverse implications for importers.
Post amendment, a service recipient in India may be required to discharge GST under reverse charge on services received from overseas intermediary service providers. This could significantly impact sectors where input tax credit is restricted, such as hospitality, travel, airlines, and petroleum.
| Points to Pause & Reflect |
Given that the amendment is prospective in nature, only invoices raised on or after 30th March 2026 will be eligible for zero-rated treatment of intermediary services.
A question may arise regarding the applicability of Section 14 of the CGST Act, 2017, which governs the time of supply in cases involving a change in the rate of tax. However, it is important to note that the tax rate applicable to intermediary services remains unchanged. The amendment impacts only the nature of supply—resulting in such services qualifying as zero-rated supplies—rather than altering the rate of tax itself. Accordingly, the provisions of Section 14 would not be applicable in this context.
This necessitates a detailed evaluation of the time of supply provisions under Section 13 read with Section 31 of the CGST Act, 2017, as the tax liability is triggered based on the time of supply determined under these provisions.
| Invoices for general (one time) services provided from 02nd March 2026 for which advances have not been received |
Where invoices are issued within 30 days from the date of provision of service, the time of supply shall be the date of invoice or date of payment whichever is earlier. However, if invoices are not issued within 30 days from the date of provision of service the time of supply shall be the date of provision of service or date of payment whichever is earlier.
Taxpayers who have raised invoices on or after 30th March 2026 will be eligible for export of service even though the services are rendered prior to amendment.
| Continuous supply of services (e.g. quarterly, semi-annually and annually) |
For intermediary services provided on a continuous basis the time of supply shall be the date of issue of invoice under Section 31(5) of the CGST Act or date of payment whichever is earlier.
The provision for date of issuance of invoice under section 31(5) of CGST Act,2017 under various circumstances are analyzed below
- Contractual Payment Due Dates: When a contract specifies a due date for payment, the invoice must be issued on or before the due date of payment. If due date falls on or after 30th March 2026 the taxpayer can avail zero rate benefits subject to receipt of payment. If due date falls before 30th March but the invoices is raised after 30th March, the services will be taxable.
- Due date of payment is not ascertainable from contract: In such cases the invoice must be issued on or before the date payment is received. Therefore, if payment is received on or after 30th March 2026, the taxpayer can avail zero rate benefits.
- Payment linked to completion of event: In such cases the invoice must be issued on or before the completion date of such event. If the event is completed on or after 30th March 2026, the taxpayer can avail zero rate benefits subject to receipt of payment.
| Advance received before 30th March 2026 |
Under GST law, the receipt of an advance payment immediately triggers the Time of Supply for services.
- In any case, if any advance consideration was received prior to 30th March 2026, the Time of Supply for that specific monetary value is permanently crystallized in the pre-amendment era.
- Consequently, the export of service will not be applicable for that advance portion. It remains taxable under the old Section 13(8)(b) provisions, regardless of whether the actual service is completed or the final invoice is raised in April 2026 or beyond.
Illustrations:
| Sr. No | Scenario | Key Dates / Facts | Time of Supply | Applicable Law | Tax Treatment |
| 1 | Invoice Due Date after amendment | Due Date: 05 Apr 2026 Invoice: 05 Apr 2026 |
05 Apr 2026 | Post-amendment | Export (Zero-rated) |
| 2 | Invoice Due Date before amendment | Due Date: 28 Mar 2026 Invoice: 28 Mar 2026 |
28 Mar 2026 | Pre-amendment | Taxable |
| 3 | Invoice delayed beyond due date | Due Date: 25 Mar 2026 Invoice: 31 Mar 2026 |
25 Mar 2026 (or service date) | Pre-amendment | Taxable + Risk |
| 4 | Monthly retainer | Due Date: 31 Mar 2026 Invoice: 31 Mar 2026 |
31 Mar 2026 | Post-amendment | Export |
| 5 | Quarterly contract | Due Date: 31 Mar 2026 Invoice: 31 Mar 2026 |
31 Mar 2026 | Post-amendment | Export |
| 5A | Quarterly (alternate case) | Due Date: 25 Mar 2026
Invoice: 31 Mar 2026 |
25 Mar 2026 | Pre-amendment | Taxable |
| 6 | No due date in contract | Invoice: 02 Apr 2026 Payment: April 2026 |
02 Apr 2026 | Post-amendment | Export |
| 7 | Payment before due date | Payment: 20 Mar 2026 Invoice: 31 Mar 2026 |
20 Mar 2026 | Pre-amendment | Taxable |
| 8 | Partial payments | ₹4L: 20 Mar 2026 ₹6L: 05 Apr 2026 |
Split basis | Mixed | ₹4L: Taxable ₹6L: Export |
| 9 | Milestone contract | M1: 20 Mar 2026 M2: 10 Apr 2026 |
Respective dates | Mixed | M1: Taxable M2: Export |
| 10 | Advance received before amendment | Advance: 20 Mar 2026 Invoice: April 2026 Service: April 2026 |
20 Mar 2026 | Pre-amendment | Taxable (no export benefit) |
| 11 | Advance received after amendment | Advance: 02 Apr 2026 Invoice: April 2026 Service: April 2026 |
02 Apr 2026 | Post-amendment
|
Export |
| 2 | Advance + balance payment | Advance: 20 Mar 2026 (10%) Balance: 05 Apr 2026(90%) |
Split basis | Mixed | Advance (10%): Taxable Balance (90%): Export |
| Import of Service (RCM) Implications |
The amendment also raises considerations regarding reverse charge liability for service recipients.
The time of supply in such cases is determined as the earlier of:
- Date of payment to supplier, or
- Date of issuance of self-invoice (within 30 days from receipt of service)
Accordingly:
- If these events occur on or after 30th March 2026, reverse charge liability may arise
- If they occur prior to 30th March 2026, the earlier tax position will continue to apply & no GST applicable
Illustrations:
| Sr. No. | Scenario | Key Dates / Facts | Time of Supply | Applicable Law | Tax Treatment |
| 1 | Payment after amendment | Payment: 05 Apr 2026
Self-invoice: 10 Apr 2026 |
05 Apr 2026 | Post-amendment | RCM applicable |
| 2 | Payment before amendment | Payment: 25 Mar 2026 | 25 Mar 2026 | Pre-amendment | No GST applicable |
| 3 | No self-invoice (30-day rule) | Service: 01 Mar 2026
Payment: 10 May 2026 No self-invoice |
31 Mar 2026 | Post-amendment | RCM applicable |
| 4 | No self-invoice (30-day rule) | Service: 01 Mar 2026
Payment: 25 Mar 2026 No self-invoice |
25 Mar 2026 | Pre-amendment | No GST applicable |
| What Should Be Done Next |
- Undertake a detailed assessment of time of supply provisions, with specific focus on transactions spanning March 2026 to ensure correct tax positioning.
- File LUT for FY 2026–27 in cases where services are exported without payment of tax.
- Revisit and realign agreements and contractual arrangements to reflect the revised tax treatment.
- Update ERP systems and tax configurations to ensure alignment with the amended provisions and reporting requirements.
- Reclassify transactions from B2CS to export of services for eligible cases and ensure e-invoicing compliance wherever applicable.
- Evaluate RCM exposure for service recipients, ensure timely discharge of tax liability, and comply with self-invoicing requirements.
- Initiate refund claims for eligible export transactions within the prescribed timelines to optimize cash flows.
| Conclusion |
This reform marks a pivotal milestone in India’s GST framework by enabling export benefits for intermediary services through alignment of place of supply with the recipient’s location. It addresses structural inefficiencies, enhances global competitiveness, and reduces long-standing disputes.
At the same time, it reshapes the tax position for importers and introduces critical timing considerations.
Overall, the amendment creates a more balanced ecosystem for cross-border services while reinforcing India’s position as a reliable and competitive global service hub.
