The omission of Section 13(8)(b) promised export status for Indian intermediary services from 30 March 2026. Just over three months in — not yet the full year sometimes claimed — here’s an honest look at what’s actually shifted, where friction remains, and what exporters should do while the picture is still forming.
A Note on Timing
Some commentary already frames this as a “one-year” story. It isn’t yet. Section 13(8)(b) of the IGST Act was omitted by the Finance Act, 2026, which received Presidential assent on 30 March 2026. As of this writing in July 2026, the amendment has been in effect for a little over three months — enough time for the first wave of refund claims, contract reviews, and early litigation to surface, but not enough for a genuine annual uptake picture. This piece takes stock honestly at the 100-day mark, and we’ll revisit it properly once a full year of data exists.
What Changed on 30 March 2026
Section 13(8)(b) had deemed the place of supply for intermediary services to be the location of the supplier — meaning an Indian broker, agent, or facilitator working for a foreign client was taxed as if the service were consumed in India, regardless of where the client actually was or that payment arrived in foreign exchange. This blocked export status and zero-rating for a wide swathe of India’s IT-ITES, BPO, KPO, and consulting sectors.
With clause (b) omitted, intermediary services now fall under the default rule in Section 13(2): place of supply is the location of the recipient. Where that recipient is genuinely outside India and the other conditions of Section 2(6) are met — payment in convertible foreign exchange, supplier and recipient not merely establishments of the same distinct person, and so on — the transaction can now qualify as a zero-rated export of services.
In one line: The place-of-supply trap that had taxed Indian exports as domestic supplies for nearly a decade has been legislatively removed — but removing the trap and seeing the industry actually walk through cleanly are two different things, and we’re only three months into watching the second part play out.
The Early Wins
Even in this short window, there are concrete, favourable signals — both from the amendment itself and from courts applying it to disputes that predate it.
The Court held that Genpact’s BPO services did not constitute “intermediary services” and qualified instead as export of services, allowing a refund of ₹26 crore. The ruling turned on a detailed analysis of the master service agreement structure, and industry bodies have noted it should help ease processing of other refund claims that had been held up on similar intermediary-classification grounds.
The Court set aside a rejection of GST refund on intermediary-classified services and remanded the matter for fresh evaluation on merits and contractual terms. Commentary on the ruling notes its timing alongside the Finance Act, 2026 amendment, and encourages exporters to audit contracts to clearly evidence services rendered on their own account rather than as agent or broker.
Refund mechanism access
Zero-rated exporters can now file LUT and supply without payment of IGST, or pay and claim a full refund — with previously blocked ITC on rent, software licenses, and professional fees becoming refundable for many businesses.
No minimum refund threshold
Reforms accompanying GST 2.0 have also removed minimum refund amount restrictions in several contexts — meaningful for smaller consultants and independent service exporters who previously found modest ITC claims not worth pursuing.
Industry advocacy vindicated
NASSCOM and the Parliamentary Standing Committee on Commerce had flagged this misclassification issue as a structural problem for years — the amendment reflects a rare instance of sustained industry representation translating into legislative change.
What Didn’t Change — And Why It Matters
This is the detail that gets lost in headline coverage of the amendment: the definition of “intermediary” under Section 2(13) of the IGST Act was not touched. The Finance Act, 2026 amended only the place-of-supply rule. A business still has to clear the threshold test of not being an intermediary in the first place before the export benefit becomes available at all.
| Test (CBIC Circular 159/15/2021-GST) | What It Requires |
|---|---|
| Tripartite structure | At least three distinct parties — two engaged in the principal transaction, one facilitating it |
| Facilitation, not supply | The intermediary arranges or facilitates the supply — it does not provide the main service on its own account |
| Sub-contractor carve-out | A party actually performing a component of the main service is treated as an independent supplier, not an intermediary |
This is exactly the fight that’s still happening
Where a business genuinely supplies services on its own account — as most IT-ITES, GCC, and BPO delivery models do — the amendment removes the tax cost entirely once export status is established. But where a tax officer still characterises the relationship as facilitation rather than direct supply, the classification dispute continues exactly as before; only the consequence of losing that argument has changed.
Where Friction Remains
No saving clause — and departmental caution
Section 13(8)(b) was omitted without a saving clause, and a strong professional view holds that pending demands and refund denials for past periods should fall away consequentially. Tax authorities may not simply concede this, and litigation for pre-amendment periods is expected to continue on its own track.
Reports of continued export-benefit holds
Trade press has reported that tax authorities have, in some cases, continued to hold back export benefits for companies with tripartite arrangements — particularly fintechs, captive units of multinational banks, and IT/ITES entities — on the view that such structures don’t represent genuine exports. This suggests administrative posture hasn’t shifted as cleanly or as quickly as the legislative text.
Contract language still under the microscope
Early guidance consistently urges businesses to audit existing contracts and remove or reword terms like “facilitate” and “arrange” where they don’t accurately reflect the actual service relationship — a sign that documentation quality, not just the law, remains decisive in practice.
The Other Side of the Coin: RCM on Imports
The amendment is genuinely a double-edged reform, and this side gets less attention. Where an Indian business engages a foreign agent, broker, or commission agent — for marketing, procurement, deal facilitation, or similar — the place of supply for that inbound service now shifts to India under the same Section 13(2) default rule. This converts what was previously outside the scope of Indian GST into an “import of services,” triggering IGST under reverse charge at 18%.
Identify inbound intermediary arrangements
Businesses paying foreign agents or brokers for procurement, sourcing, or facilitation services need to map these arrangements specifically, since many previously fell outside GST’s reach entirely.
Assess the net cash impact
Where full ITC is available on the RCM-paid IGST, the net cost is broadly neutral. Where ITC is restricted — sectors like hospitality, travel, and petroleum are particularly exposed — this is a genuine new cost, not just a compliance formality.
Set up self-invoicing under Section 31(3)(f)
Since the foreign supplier won’t issue a GST-compliant invoice, the Indian recipient needs a self-invoicing process in place to support RCM compliance and any subsequent ITC claim.
Practical Steps for Exporters, Right Now
- Confirm whether your business genuinely supplies services on its own account, or whether it fits the tripartite “intermediary” test under Section 2(13) and Circular 159/15/2021-GST
- Audit existing and template contracts with overseas clients, removing or clarifying language like “facilitate” or “arrange” where it doesn’t reflect the actual commercial relationship
- File the Letter of Undertaking (LUT) for FY 2026-27 if not already done, before raising the first zero-rated invoice
- Quantify accumulated ITC on inputs and input services that has been blocked in prior periods, and evaluate refund claims under Section 54(3)
- Where a refund claim or demand for a pre-amendment period is pending, take specialist advice before settling — recent High Court rulings may materially strengthen the position
- Separately map any inbound intermediary arrangements with foreign agents or brokers, and assess RCM exposure and ITC eligibility on those payments
- Set up or confirm a self-invoicing process for RCM compliance on newly taxable inbound intermediary services
- Track departmental practice closely over the coming months — administrative posture on refund processing appears to be lagging the legislative change in some reported cases
Quick FAQs
Does every Indian business serving foreign clients now automatically get export status?
No. The amendment only fixes the place-of-supply rule. A business must first establish it isn’t an “intermediary” under Section 2(13) — meaning it supplies the service on its own account rather than merely arranging or facilitating a supply between two other parties.
Can we claim refunds for GST paid on intermediary services before 30 March 2026?
This remains contested. The omission has no saving clause, and while a strong view supports dropping past demands and unlocking past refund claims, tax authorities may not accept this automatically. Recent High Court rulings are helpful precedent, but each case needs to be assessed on its specific facts and litigation history.
What’s the single biggest documentation change businesses should make?
Reviewing and, where necessary, rewording contracts with overseas clients so they clearly evidence a direct, principal-to-principal service relationship — not an agency or brokerage arrangement — since this is exactly what determines whether the export benefit applies at all.
Is the RCM impact on imported intermediary services avoidable?
Not by avoiding the tax itself, but the net cash impact can be neutral where full ITC is available on the RCM-paid IGST. Businesses in sectors with restricted ITC eligibility should specifically budget for this as a new cost.