GST Intermediary Services 2026: IGST Section 13(8)(b) Removed - Outbound Exports and Inbound RCM Rules

GST Intermediary Services 2026

The classification of intermediary services has been one of the most litigated areas in Indian GST since 2017. Section 13(8)(b) of the IGST Act treated intermediary services rendered to a foreign client as supplied at the location of the supplier (i.e. India), which meant:

• Indian intermediaries could not call those services "exports" even though the customer and the consumption were both abroad.
• They had to charge 18% domestic GST on commission and brokerage income from foreign clients.
• Foreign clients refused to bear Indian GST and either reduced prices or moved business to non-Indian intermediaries.
• ITC built up because the GST was a cost on revenue, not a credit on input.

The Finance Act 2026 closed this two-decade-old anomaly by deleting Section 13(8)(b). From March 30, 2026, intermediary services follow the general place-of-supply rule under Section 13(2): place of supply is the location of the recipient. If the recipient is outside India, the supply qualifies as an export of service and is zero-rated.

The change has two-way consequences. Outbound intermediary services from India to foreign clients are now exports. Inbound intermediary services (foreign agents and commission brokers acting for Indian companies) now have an Indian place of supply, which triggers reverse charge on the Indian recipient.

This guide explains both directions, the practical compliance steps, and what the GST 2.0 changes mean for accumulated ITC, refunds, and contract pricing.

What Is an Intermediary Under GST

Section 2(13) of the IGST Act defines an intermediary as a "broker, agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, 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".

Two tests must be met:

1. The person facilitates the supply between two principals (the seller and the buyer). They are not the supplier or the buyer themselves.
2. They earn a commission, brokerage, or referral fee on the arrangement, not the principal value of the underlying transaction.

Common intermediary scenarios:

• Marketing and lead generation agencies that bring foreign-buyer leads to Indian sellers (or vice versa) for a referral fee.
• Recruitment companies that place candidates with foreign employers and earn placement commission.
• Travel agents that book foreign hotels and airlines on behalf of Indian travellers and earn commission.
• Insurance and financial brokers that arrange policies between foreign insurers and Indian customers.
• Software distributors and resellers who facilitate licence sales between a foreign software company and Indian end-customers.
• Foreign agents and commission brokers engaged by Indian exporters to find buyers in foreign markets.

Where a person supplies a service in their own name and bears the risk and reward of the principal transaction, they are not an intermediary, even if their margin is commission-like. This was the principal litigation area before 2026 because revenue authorities often argued every white-label or principal arrangement was actually intermediary, and SEZ and STPI exporters spent years contesting this.

What Changed on March 30, 2026

Before (until March 29, 2026):

• IGST Section 13(8)(b) was the special rule. Place of supply for intermediary services = location of the supplier.
• An Indian intermediary serving a foreign client had place of supply in India.
• The supply was not an export. 18% GST was charged.
• ITC accumulated; refund was contested.

After (from March 30, 2026):

• Section 13(8)(b) is repealed by the Finance Act 2026.
• Intermediary services follow the general rule under Section 13(2): place of supply = location of the recipient.
• Indian intermediary serving a foreign client → place of supply outside India → export of service → zero-rated under Section 16 of the IGST Act.
• Foreign intermediary serving an Indian client → place of supply in India → import of service → 18% IGST under reverse charge by the Indian recipient.

The change is operational from March 30, 2026 for invoices raised on or after that date. Invoices raised earlier continue under the old framework regardless of when payment is received, because the time of supply for a service is the earliest of invoice date or payment date under Section 13 of the CGST Act.

For the broader GST 2.0 framework that came into force around the same time, see the GST 2.0 April 2026 guide, which covers Aadhaar authentication for refunds, hard ITC validation, and the Green Track exporter refund window. For the place-of-supply principle generally, see the GST place of supply rules guide. For the import-of-services treatment, see the reverse charge mechanism guide.

Outbound: Indian Intermediaries Serving Foreign Clients

This is the relief side of the change.

Who Benefits

• IT and ITES companies whose contracts with foreign clients were re-classified by tax authorities as intermediary work.
• BPO and call centres whose work was characterised as facilitating between an offshore principal and end-customers.
• KPO and consulting firms serving foreign clients where the engagement was deemed agency rather than principal.
• Recruitment, talent acquisition, and staffing firms placing candidates with foreign employers.
• Marketing agencies and lead-gen firms earning referral commissions from foreign buyers or sellers.
• Software resellers and distributors facilitating cross-border licence sales.
• E-commerce facilitators running Indian operations for foreign marketplaces.

What You Can Now Do

1. Treat foreign-client commission and intermediary income as zero-rated export of service, provided the conditions in Section 2(6) of the IGST Act are met:
   • The supplier is in India.
   • The recipient is outside India.
   • The place of supply is outside India (now satisfied because Section 13(8)(b) is repealed).
   • The payment is received in convertible foreign exchange (or in INR where permitted by RBI).
   • The supplier and recipient are not merely establishments of the same person.
2. File a Letter of Undertaking (LUT) through Form RFD-11 on the GST portal at the start of the financial year, so the export goes out without payment of IGST (the alternative is to pay IGST and claim a refund, which is more cash-locked).
3. Issue an export invoice with "EXPORT WITHOUT PAYMENT OF IGST UNDER LUT" in the header, with the foreign client's address and the convertible-foreign-exchange clause.
4. Report the export in GSTR-1 Table 6A (exports) and in GSTR-3B Table 3.1(b) (zero-rated supplies).
5. Claim accumulated ITC as a refund under Section 54 of the CGST Act through Form RFD-01 every quarter. Under GST 2.0, exporters with a clean compliance record qualify for the Green Track refund window with disbursement within seven working days.

Past Periods (Pre March 30, 2026)

For invoices raised before March 30, 2026, the old framework continues. ITC accumulated from those periods can still be refunded only if the export classification was already accepted by the relevant officer; otherwise the position remains contested. Where matters are at appeal, the new law strengthens the assessee's position prospectively but does not automatically settle the past dispute, since the change is not made expressly retrospective.

Inbound: Indian Companies Engaging Foreign Agents

This is the new compliance burden created by the change.

Common Inbound Scenarios

• Foreign sales agents engaged by Indian exporters to find buyers in their territories.
• Commission-based foreign distributors for Indian product companies.
• Foreign recruitment and headhunting firms placing Indian talent overseas with the Indian company paying the placement fee.
• Foreign marketing affiliates earning a referral commission for sending leads or signed customers to an Indian SaaS or e-commerce business.
• Foreign brokers for travel, insurance, real estate, or financial transactions where the Indian party pays commission.

What Indian Recipients Must Do

1. Recognise that the place of supply is now in India (location of the recipient under Section 13(2)). The transaction is an import of service.
2. Self-assess 18% IGST under reverse charge under Section 5(3) of the IGST Act on the rupee equivalent of the commission paid.
3. Pay the IGST in cash through the electronic cash ledger when filing GSTR-3B (Section 49(4) prohibits using ITC to discharge reverse-charge tax).
4. Claim the same IGST as ITC in GSTR-3B Table 4(A)(3) the same month, subject to the standard Section 16 conditions and Section 17(5) exclusions.
5. Issue a self-invoice under Section 31(3)(f) capturing the foreign agent's name, address, your GSTIN, the commission description, and the IGST computed.
6. Reconcile annually in GSTR-9 under Table 4(G) (RCM inward supplies) and Table 6(C) (ITC on RCM).

The cash-flow impact is net neutral if the Indian recipient is fully GST-registered and the commission is for business purposes (the IGST paid is reclaimed as ITC the same month). The administrative burden is real, however: the obligation cannot be skipped on the ground that it is cash-flow neutral, because the IGST cash payment is a separate compliance check from the ITC claim.

For startups paying foreign affiliates, agencies, or referral brokers as part of their digital marketing, the same RCM principles also apply to platform-based ad spend; see the GST ITC for startups guide for the broader inbound-services framework.

Contract and Pricing Adjustments to Make

The change affects how Indian companies should structure both sides of intermediary contracts.

For Indian Intermediaries (Outbound Side)

• Renegotiate contracts that were previously priced "GST-inclusive" or "GST recoverable from buyer". Foreign clients no longer need to bear Indian GST since the supply is now zero-rated. The headline price should reflect the actual export economics.
• Update invoice templates to include LUT reference, export classification, and convertible-foreign-exchange clause.
• Refresh transfer pricing documentation if you serve a related foreign entity. The change in GST treatment does not alter the income tax transfer pricing position, but the revised invoice and contract should be referenced.
• Audit the Section 16 export conditions every quarter. The most common loss of zero-rating is the foreign-exchange-receipt clause: if payment is received via a different route or after the 9-month window allowed by the RBI, the export benefit is lost and 18% IGST must be paid retrospectively with interest.

For Indian Recipients (Inbound Side)

• Identify all foreign agent and commission contracts. List vendors, contract value, frequency, and currency.
• Build the RCM workflow: monthly accrual of 18% IGST on commission paid, cash payment via PMT-06 challan, GSTR-3B Table 3.1(d) reporting, ITC claim under Table 4(A)(3), self-invoice under Section 31(3)(f).
• Update the foreign agent agreement to clarify that any Indian indirect tax cost on the commission is borne by the Indian recipient. This avoids disputes if an authority later re-characterises a payment.
• Track the contract aggregate for the import-of-services threshold under Section 24, which makes mandatory GST registration unavoidable once cross-border services are received (registration is mandatory regardless of turnover).

Penalty and Interest Exposure

Failure to comply with the new framework on either side has standard GST consequences:

What This Means for Accumulated Pre-2026 ITC

Many Indian intermediaries who were classified under the old Section 13(8)(b) regime have unutilised ITC sitting on their books from years of paying 18% domestic GST on what was effectively export revenue. The position on this legacy ITC after March 30, 2026:

• If past invoices were treated as exports (zero-rated) by the assessee and refund was already filed: continue the existing refund track. Section 16 export conditions must be met.
• If past invoices were treated as domestic supplies with 18% GST charged: the GST already paid is not refundable to the assessee; it stands as a closed transaction. Future invoices from March 30, 2026 are zero-rated, and ITC accumulated from cost inputs can be refunded going forward.
• Where the past classification is at appeal: the change in law is prospective. Litigation continues on the old facts, but new invoices benefit from the clear export status without further argument.

For exporters with substantial accumulated ITC, the Green Track refund window introduced under GST 2.0 (with seven-working-day disbursement for clean exporters) is a meaningful cash-flow improvement. See the GST 2.0 April 2026 changes guide for the eligibility and process.

Tax Garden's compliance subscriptions cover LUT filing, monthly export invoice generation, RCM identification on inbound foreign-agent contracts, GSTR-3B preparation with full ITC, and quarterly refund claims for export-heavy businesses.

Frequently Asked Questions

What is the place of supply for intermediary services under GST after March 30, 2026?

The place of supply is now the location of the recipient under Section 13(2) of the IGST Act. The earlier special rule under Section 13(8)(b), which fixed the place of supply at the location of the supplier, has been repealed by the Finance Act 2026. If the recipient is outside India, the supply qualifies as an export of service. If the recipient is in India and the supplier is outside India, the supply is an import of service triggering reverse charge on the Indian recipient.

Are commission and intermediary services from Indian companies to foreign clients now exports?

Yes. From March 30, 2026, an Indian intermediary serving a foreign client meets the place-of-supply test for export of service under Section 2(6) of the IGST Act, provided the other conditions are met (supplier in India, recipient outside India, payment in convertible foreign exchange, parties not mere establishments of the same person). File LUT through Form RFD-11 to export without payment of IGST, or pay IGST and claim a refund under Section 54.

Do I need to pay GST on commission paid to a foreign sales agent or broker?

Yes. From March 30, 2026, the place of supply for intermediary services received from a foreign agent is in India (location of the recipient). This makes the transaction an import of service. The Indian recipient self-assesses 18% IGST under reverse charge, pays it in cash through GSTR-3B Table 3.1(d), and claims the same IGST as ITC in Table 4(A)(3) the same month. A self-invoice under Section 31(3)(f) is required.

What is a Letter of Undertaking (LUT) and how do I file it?

An LUT under Rule 96A of the CGST Rules is a written undertaking that allows an exporter to export services or goods without paying IGST upfront. It is filed through Form RFD-11 on the GST portal at the start of every financial year. Eligibility: the exporter must not have been prosecuted for tax evasion above Rs 2.5 crore. Without an LUT, exports must pay IGST first and then claim a refund, which locks cash for several weeks.

What happens to my accumulated ITC from pre-2026 intermediary services?

Where past invoices were treated as exports and refund was filed under Section 54, continue the existing refund track. Where past invoices were treated as domestic supplies with 18% GST charged, the past GST is not refundable to the assessee. Future invoices from March 30, 2026 are zero-rated, and ITC accumulated from cost inputs can be refunded under the standard quarterly refund process. The change is prospective and does not automatically settle past disputes at appeal.

Is the Indian intermediary still subject to GST on its own input services?

Yes. The intermediary continues to receive input services (cloud, SaaS, marketing, salaries with employee-cost overheads, etc.) on which 18% GST or reverse-charge IGST applies. The ITC on these inputs accumulates as a credit because the output supply (the intermediary export) is zero-rated. The credit is recoverable as a quarterly refund under Section 54 of the CGST Act through Form RFD-01.

Does the change apply to invoices raised before March 30, 2026?

No. The repeal of Section 13(8)(b) is operational for invoices raised on or after March 30, 2026. Invoices raised earlier continue under the old framework based on the time-of-supply rules under Section 13 of the CGST Act, which take the earlier of invoice date or payment date. Backdating an invoice to claim the new export benefit would be a substantive breach and is detectable through the e-invoice IRN and the GSTR-1 reporting trail.

Will my foreign client save Indian GST after the change?

If your contract previously priced the Indian GST as a recoverable cost on the foreign client, yes. From March 30, 2026, the supply is zero-rated and no GST is charged on the export invoice. Many established contracts have a tax-gross-up clause that will need renegotiation to ensure the headline price reflects the new GST-free economics. Update the invoice template to mention 'EXPORT WITHOUT PAYMENT OF IGST UNDER LUT' for clarity.

Sources

This guide is verified against the IGST Act Sections 2(6), 2(13), 5(3), 13(2), 13(8)(b) (now repealed), and 16, the CGST Act Sections 16, 17(5), 31(3)(f), 49(4), 50, and 54, the Finance Act 2026 amendment repealing Section 13(8)(b), and CBIC notifications around the LUT filing process under Rule 96A. The Green Track refund window referenced is from CBIC notifications under GST 2.0 effective April 1, 2026 covered in the GST 2.0 April 2026 guide. Cross-checked against ClearTax, IndiaFilings, TaxGuru, Grant Thornton, and CAClubIndia coverage of the intermediary services amendment as of May 2026. For contract-specific advice, especially on legacy ITC recovery and litigation positions for pre-2026 periods, consult a GST adviser before adopting a final position.