GST on Intermediary Services: Section 13(8)(b) Is Gone, and Your Commission From Abroad Is Now an Export
Section 157 of the Finance Act 2026 omitted Section 13(8)(b) of the IGST Act from 30 March 2026. Commission and facilitation income from overseas clients is now zero-rated export — but services from foreign agents attract IGST under reverse charge.
- Section 157 of the Finance Act, 2026 omitted Section 13(8)(b) of the IGST Act with effect from 30 March 2026, the date of Presidential assent.
- An intermediary's place of supply now follows the Section 13(2) default — the recipient's location — so services to overseas clients can qualify as zero-rated exports.
- The mirror effect is that intermediary services received from abroad become imports of services attracting IGST under reverse charge.
- The cut-over runs on date of supply, not on invoice or payment date, and a valid LUT in Form RFD-11 is needed before raising the first export invoice.
Section 157 of the Finance Act, 2026 omitted Section 13(8)(b) of the IGST Act, and with it the deeming rule that taxed an Indian intermediary's services to a foreign client at 18% as if they had been supplied in India. The change took effect on 30 March 2026, the date of Presidential assent (Grant Thornton Bharat, 2026).
For a small consultancy, marketing agency or freelancer who arranges or facilitates supplies for an overseas principal, this converts a domestic taxable supply into a zero-rated export. There is a cost on the other side of the trade, and it catches businesses that pay foreign agents.
- Section 13(8)(b) of the IGST Act stands omitted with effect from 30 March 2026, so an intermediary's place of supply now follows the default Section 13(2) rule — the recipient's location.
- Services to an overseas recipient can now qualify as exports under Section 2(6), zero-rated under Section 16, either under LUT without IGST or with IGST followed by a refund.
- The mirror effect: intermediary services received from abroad are now imports of services, attracting IGST under reverse charge.
- The cut-over runs on date of supply, not invoice or payment date — services rendered on or after 30 March 2026 fall under the amended law.
What was Section 13(8)(b) doing, and why did it hurt?
It deemed the place of supply for intermediary services to be the supplier's location. An Indian agent earning a commission from a foreign principal therefore made a domestic supply in the eyes of the law, paid 18% GST on it, and could not claim it as an export or recover a refund — even though the client, the contract and the money were all outside India (Grant Thornton Bharat, 2026).
"Intermediary" is defined in Section 2(13) as a broker, agent or person who arranges or facilitates a supply between two or more persons, excluding someone supplying the main service on their own account. Circular No. 159/15/2021-GST of 20 September 2021 set out the tests — at least three parties, two distinct supplies, and no supply of the main service on one's own account — and disputes continued anyway, particularly over IT and back-office arrangements.
The commercial effect was straightforward. An 18% tax that a foreign client would not reimburse came out of the Indian supplier's margin, and the provision became one of the most litigated corners of GST, with the Bombay and Madras High Courts having ruled in favour of taxpayers before the legislature stepped in.
What is the position from 30 March 2026?
Place of supply falls back to the Section 13(2) default — the recipient's location. Where the recipient is outside India and the other Section 2(6) conditions for export of services are met, the supply is zero-rated under Section 16: either supplied without IGST under a Letter of Undertaking, or with IGST paid and refunded (CAclubindia, 2026).
Section 157 carried no separate commencement date, so Section 5 of the General Clauses Act, 1897 applies and the omission runs from the assent date of 30 March 2026. The named beneficiaries are IT and ITES, BPO, GCC operations, consulting, marketing support and procurement services — which, scaled down, is most of the Indian agency and freelance sector serving overseas clients.
Are you actually an intermediary?
Most freelancers are not, and that distinction decides whether any of this applies to you. A developer writing code for a US client supplies the main service on their own account — never an intermediary, and their supply was already an export. The rule bites where you arrange or facilitate a supply between two other parties without providing the underlying service yourself.
In practice that means the agency sourcing Indian vendors for a foreign brand, the consultant introducing overseas buyers to Indian manufacturers on commission, the recruiter placing candidates for a foreign employer, and the marketing firm running campaigns where the media is contracted in the client's name. If your invoice reads "commission" or "facilitation fee" rather than a fee for your own deliverable, you were probably paying the 18%.
Where the classification was always contested — back-office work billed as support but argued by officers to be facilitation — the amendment removes most of the stake in the argument going forward, since both readings now land on export treatment.
What is the catch on inbound services?
Symmetry. Because place of supply is now the recipient's location, intermediary services you receive from a foreign supplier become imports of services under Section 2(11) and attract IGST under reverse charge per Section 5(3) and 5(4) of the IGST Act — typically 18%, self-assessed and paid by you (Grant Thornton Bharat, 2026).
For a business with full input tax credit, this is a cash-flow entry rather than a cost: pay under RCM, claim the credit. The cost is real where credit is blocked or restricted. Pay a foreign booking agent, an overseas cargo intermediary or a securities broker abroad, and check your credit position before assuming this nets to zero.
Note what this means for a small exporter who also buys from foreign marketplaces or agents. The same amendment that removed tax from your outbound commission may have added it to your inbound one — worth mapping both directions rather than only the pleasant side.
What should you do now?
Start with the LUT. Exporting services without paying IGST requires a valid Letter of Undertaking in Form RFD-11 for the financial year, and the FY 2025-26 LUT expired on 31 March 2026 — it should be in place before you raise the first export invoice, not after (ClearTax, 2026). Our LUT renewal service handles the filing where yours has lapsed.
Then review accumulated input tax credit and file refunds under Section 54(3) where the zero-rated route has left credit stranded. Map every arrangement where you pay a foreign agent or facilitator and confirm whether RCM now applies. And revisit contracts with overseas principals — a price agreed when 18% was coming out of your margin may deserve renegotiation now that it is not.
On past periods, tread carefully. There is potential to unlock previously blocked refund claims, but no saving clause was prescribed and the litigation risk is real. Take a view with advice rather than filing hopefully. For the neighbouring rules, our posts on cross-border remittance for SaaS exporters and the GST 2.0 two-slab structure cover the rest of the export compliance stack, and our monthly GST return filing service reports the zero-rated supplies and RCM entries correctly in GSTR-1 and GSTR-3B.
What should you verify before using this GST & Finance Updates guide?
Before acting on gst on intermediary services, verify the current rules or platform behavior with the GST Portal. The practical answer depends on your business model, state, turnover, documents, software stack, and whether the decision affects tax, customer data, paid media spend, or a production workflow.
Use this article as a working checklist, then confirm thresholds, registration status, return forms, document rules, and portal notices. In our audits, most expensive mistakes do not come from ignoring the whole process. They come from one stale assumption, one mismatched address, one missing event, or one automation path that nobody tested after launch.
| Checkpoint | Why it matters | Where to confirm |
|---|---|---|
| Current rule or platform status | Limits, forms, policies, and APIs can change after a blog update. | GST Portal |
| Your exact business case | A local shop, freelancer, D2C store, agency, and SaaS team rarely need the same next step. | Documents, invoices, campaign data, analytics setup, or workflow logs |
| Implementation evidence | The safest GST decision is backed by proof, not memory or screenshots from an old setup. | Portal acknowledgement, dashboard export, invoice sample, test lead, or error log |
How do we apply this in real business work?
We start with the smallest decision that can be verified. For compliance work, that means matching PAN, address, bank, invoices, and portal status before filing. For websites, marketing, analytics, and automation, it means testing the real user path from first click to final record. The boring checks catch the costly failures.
A useful rule: if a claim changes money, tax, reporting, or customer communication, keep evidence for it. Save the acknowledgement, export the report, test the form, and note the date you verified the source. That gives you a clean trail when a client, officer, platform, or internal team asks why the setup was done that way.
When should you get expert review?
Get expert review when the next action can create tax exposure, lost reporting data, ad waste, broken customer communication, or production downtime. A simple self-check is enough for low-risk learning. A filed return, new registration, tracking migration, paid campaign restructure, or live automation deserves a second set of eyes before it affects customers or records.
How often should this be rechecked?
Recheck the decision whenever your turnover, state, product mix, campaign budget, website stack, analytics property, or workflow ownership changes. Also recheck it after major portal updates, platform policy changes, annual filing deadlines, and vendor migrations. The guide is useful today only if the facts behind it still match your business.
What is the fastest safe way to decide?
Write the decision in one sentence, list the proof needed for that sentence, and verify only those items first. This keeps the work focused. If the proof confirms the decision, proceed. If one item is unclear, pause and resolve that point before changing filings, campaigns, tracking, website code, or automation logic.
What can go wrong if you skip verification?
The usual failure is not dramatic at first. It looks like a rejected application, a wrong tax invoice, a missing conversion, a duplicate lead, a broken report, or a workflow that silently stops. Those small failures become expensive when nobody notices them until month-end reporting, filing day, or a customer escalation.
What evidence should you keep after making the change?
Keep enough evidence to reconstruct the decision later. For a compliance topic, that usually means the application reference number, registration certificate, invoice sample, return acknowledgement, payment challan, notice reply, or source link checked on the day of filing. For a website, campaign, analytics setup, or automation, keep the before-and-after screenshot, test submission, dashboard export, webhook log, and the exact setting that changed.
This matters because most business fixes are revisited months later, when nobody remembers the original reason. A short evidence trail makes audits faster, handovers cleaner, and vendor conversations more precise. It also keeps the advice in this guide tied to your real operating context instead of becoming a generic checklist that gets copied without review.
- Date checked: record when the official source, dashboard, or portal screen was reviewed.
- Business context: note the entity, state, product, campaign, property, or workflow affected.
- Proof of action: save the acknowledgement, report export, test result, or live URL.
- Owner: assign one person to re-check the item when rules, tools, or business volume change.
Which next step should you take after reading this?
Turn the article into one action list. Mark what is already true, what needs proof, and what needs expert review. If you want to go deeper, compare this guide with GST LUT Renewal, Monthly GST Return Filing, and GST LUT Application. Then update the decision only after the official source and your own records agree.
Frequently asked questions
What changed for GST on intermediary services in 2026?
Section 157 of the Finance Act, 2026 omitted Section 13(8)(b) of the IGST Act with effect from 30 March 2026. That provision had deemed an intermediary's place of supply to be the supplier's location in India, making commission from a foreign client a domestic supply taxed at 18%. Place of supply now follows the Section 13(2) default, which is the recipient's location.
Is my commission from an overseas client now zero-rated?
Where the recipient is outside India and the other conditions in Section 2(6) for export of services are met, yes — the supply is zero-rated under Section 16. You can supply without paying IGST under a Letter of Undertaking, or pay IGST and claim a refund. The change applies to services rendered on or after 30 March 2026, regardless of when you invoiced.
Am I an intermediary under GST?
Only if you arrange or facilitate a supply between two other parties without supplying the main service on your own account. A developer or designer billing a foreign client for their own work is not an intermediary — that was already an export. An agency sourcing Indian vendors for a foreign brand on commission, or a recruiter placing candidates for a foreign employer, typically is.
Do I now pay GST on services from a foreign agent?
Yes. Because place of supply shifted to the recipient's location, intermediary services received from overseas suppliers are imports of services under Section 2(11) and attract IGST under reverse charge, typically at 18%, self-assessed by you. Where your input tax credit is unrestricted this is a cash-flow entry; where credit is blocked, it is a real cost.
Let's talk about your business.
Tell us what you're working on and where you want to go. We'll put together a plan. No obligation, no sales pitch.
- Free 30-minute call
- A plan built around your goals
- No obligation, no pressure
- Your own account manager