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, 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.

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.