Budget 2026 GST Amendment: Export Status for Intermediary Services after Omission of Section 13(8)(b) – Compliance and Refund Guide
Introduction – Budget 2026 Resolves Long-Standing GST Issue for Intermediary Services
The Finance Bill, 2026 has proposed a landmark amendment under the GST framework by omitting Section 13(8)(b) of the IGST Act, 2017. This provision historically created a major disadvantage for Indian intermediaries providing services to foreign clients, as such services were taxed in India despite being export-oriented under GST on intermediary services export provisions.
With this amendment, intermediary services export under GST can now qualify as export of services, subject to prescribed conditions. This change aligns GST with the destination-based taxation principle and removes a long-standing anomaly affecting commission agents, brokers, and global service facilitators under Budget 2026 GST amendment intermediary services.
The amendment significantly enhances the competitiveness of Indian intermediaries operating in international markets, including those operating from IFSC and other global service hubs in India.
Meaning of Intermediary Services under GST
Under GST law, an intermediary is defined as a person who arranges or facilitates the supply of goods or services between two or more parties but does not supply such goods or services on their own account.
Common examples of intermediary services under GST include:
- Commission agents facilitating export or import transactions
- Brokers arranging financial or commercial deals
- Sourcing agents connecting foreign buyers with Indian suppliers
- Consultants facilitating cross-border service arrangements
- Financial intermediaries assisting foreign investment or transactions
The key distinction is that an intermediary acts as a facilitator, not as the principal service provider. The intermediary earns commission or facilitation fees for arranging the transaction.
This classification has historically been important because GST treatment depended on whether the service qualified as intermediary or principal supply.
GST Treatment of Intermediary Services – Before vs After Budget 2026
Prior to Budget 2026, Section 13(8)(b) GST amendment discussions centered around the issue that the place of supply for intermediary services would be the location of the supplier, even if the recipient was located outside India. This resulted in GST being applicable on services provided to foreign clients.
Following the omission of Section 13(8)(b), the place of supply will now be determined under the general rule of Section 13(2), i.e., the location of the recipient.
Comparison Table: GST on Intermediary Services
| Particular | Before Amendment (Section 13(8)(b)) | After Amendment (Section 13(2)) |
|---|---|---|
| Place of supply | Location of supplier (India) | Location of recipient |
| GST applicability | 18% GST applicable | Zero rated, if export conditions satisfied |
| Export status | Not treated as export | Export of intermediary services under GST |
| LUT option | Not available | Available |
| ITC refund | Not allowed | GST refund on intermediary services export available |
| Competitiveness globally | Reduced due to GST cost | Improved competitiveness |
| Litigation | Significant disputes | Expected to reduce |
This amendment fundamentally changes the GST on intermediary services export position and enables Indian intermediaries to operate globally without GST cost implications, provided export conditions are satisfied.
Export of Intermediary Services – Conditions to Qualify as Export
Even after the amendment, export of intermediary services under GST will qualify as export of services only if the prescribed export conditions under GST are fulfilled. These conditions include:
- The supplier of service is located in India
- The recipient of service is located outside India
- The place of supply of service is outside India
- Payment is received in convertible foreign exchange or permitted foreign currency
- Supplier and recipient are not merely establishments of the same legal entity
Proper documentation is essential to support export classification. This includes foreign client agreements, invoices, foreign inward remittance certificates (FIRC), and banking documents. Failure to meet these conditions may result in denial of export benefits and GST refund for intermediary services.
LUT and GST Refund Benefits – Major Financial Advantage
One of the most significant benefits of this amendment is the eligibility to export intermediary services under a Letter of Undertaking (LUT for intermediary services export) without charging GST. This enables intermediary service providers to supply services without paying output GST.
Further, businesses can claim a refund of Input Tax Credit (ITC) paid on expenses such as:
- Professional services
- Office rent
- Technology and software services
- Consultancy expenses
This refund mechanism reduces operational cost and improves working capital efficiency. The amendment removes the cascading tax burden and ensures that GST does not become a cost for export-oriented service providers claiming GST refund intermediary services export benefits.
Reverse Charge Mechanism (RCM) on Import of Intermediary Services
While the amendment provides significant benefits for exporters, it also creates compliance implications for Indian businesses receiving intermediary services from foreign providers.
Under the revised provisions, when intermediary services are received from a foreign intermediary, the place of supply will be India. As a result, the Indian recipient will be required to pay GST under the Reverse Charge Mechanism (RCM) on import of intermediary services under GST.
| Scenario | GST Treatment |
|---|---|
| Export of intermediary service | Zero rated |
| Import of intermediary service | GST payable under RCM on intermediary services import |
Businesses receiving such services must ensure proper GST payment under reverse charge and claim input tax credit where eligible.
Effective Date and Transitional Impact
The amendment will take effect from the date notified after enactment of the Finance Bill, 2026. Businesses providing intermediary services should review their contracts, invoicing practices, and GST positions to align with the revised provisions.
Proper transition planning will ensure timely compliance and enable businesses to benefit from export status for intermediary services under GST and refund eligibility without disruption.
Conclusion – Major Boost for Indian Intermediary Service Exporters
The omission of Section 13(8)(b) represents a significant structural reform under GST and corrects a long-standing issue affecting intermediary service providers. By allowing intermediary services export under GST, the amendment removes the GST cost burden and enables refund of input taxes.
This change will particularly benefit commission agents, brokers, consultants, and IFSC intermediaries serving global clients. It enhances India’s attractiveness as an international service hub and aligns GST with global tax practices.
Businesses engaged in cross-border intermediary services should proactively evaluate their GST structure, apply for LUT where required, and implement appropriate compliance processes to fully leverage the benefits of this amendment.
Frequently Asked Questions (FAQs)
Is GST applicable on intermediary services provided to foreign clients after Budget 2026?
If export conditions are satisfied, intermediary services export under GST will qualify as export of services and GST will not be applicable. Such services can be supplied under LUT without charging GST.
Can intermediary services now qualify as export of services?
Yes. After omission of Section 13(8)(b) GST amendment, intermediary services can qualify as export of services if the recipient is located outside India and payment is received in foreign currency.
Can intermediary services claim GST refund?
Yes. Intermediary service providers can claim GST refund on intermediary services export for input tax credit on business expenses used for providing export services.
Is LUT required for intermediary services export?
Yes. Filing LUT for intermediary services export allows service providers to export services without charging GST and claim refund of input tax credit.
Is GST applicable under reverse charge on intermediary services imported from foreign providers?
Yes. GST must be paid under reverse charge when intermediary services are received from foreign providers under RCM on import intermediary services GST provisions.
