Short answer: Section 13(8)(b) of the IGST Act was omitted with effect from 30 March 2026. Intermediary services to an overseas recipient are no longer deemed to be supplied in India, so they can now qualify as exports and be zero-rated. The change is prospective — earlier periods stand on the arguments that already existed.
The provision, and why it hurt
Under the general rule, the place of supply of a service to a foreign recipient is the location of the recipient — outside India — which is one of the conditions for treating the supply as an export.
Section 13(8)(b) carved out intermediary services and fixed their place of supply at the location of the supplier. For an Indian firm, that meant India.
The consequence was severe and widely felt in Bengaluru:
- The firm earned in convertible foreign exchange from a client with no presence in India.
- The supply was nonetheless treated as a domestic supply, taxable at 18%.
- The overseas client could not use the credit, so the tax was an absolute cost rather than a pass-through.
- The firm could not zero-rate, and could not claim refund of accumulated input credit on that basis.
Whole categories of business were caught: marketing and business-development support for foreign principals, sourcing and vendor-liaison operations, back-office arrangements sitting between an overseas group and Indian counterparties.
What "intermediary" meant, and why it was so contested
An intermediary was, broadly, a broker or agent who arranges or facilitates a supply between two or more persons, but not a person supplying the service on their own account.
That distinction generated years of dispute, because the difference between facilitating a supply and providing a service that assists someone's business is not obvious on most real contracts. The accepted markers were:
- at least three parties — the intermediary plus the two it sits between;
- two distinct supplies — the main supply, and the facilitation of it;
- the intermediary not providing the main supply on its own account; and
- sub-contracting is not intermediation — a person doing the work themselves is a principal, not a middleman.
Classification decided everything. The same commercial arrangement, described differently in two contracts, produced an 18% cost in one and nothing in the other.
What changes now
With the provision omitted, the place of supply for these services falls back to the general rule — the location of the recipient.
For a service to an overseas recipient, that condition is now satisfied. The supply can qualify as an export and be zero-rated.
| Before 30 March 2026 | From 30 March 2026 | |
|---|---|---|
| Place of supply, intermediary services | Location of supplier — India | Location of recipient |
| Service to overseas client | Domestic supply, 18% | Can qualify as export |
| Zero-rating and refund of input credit | Not available on that basis | Available, subject to the other conditions |
| Whether you are an "intermediary" | Decided the liability | Largely stops deciding it |
The prospective limit — read this carefully
The omission takes effect from 30 March 2026. It is not expressed as retrospective.
Periods before that date continue to be governed by the provision as it then stood. The deletion does not, by itself, reopen them or convert past domestic supplies into exports.
That does not mean earlier periods are hopeless. The provision was subject to sustained constitutional challenge, and those arguments are unaffected by its later deletion — if anything, the deletion is context. But they are the arguments that were already available, and they have to be run on their own merits.
Two overstatements to avoid. That the deletion entitles you to refunds for past years: it does not. That past periods are now closed and not worth examining: that is not right either, particularly where a demand is live or a period is still open.
What to do now
Zero-rating is not automatic. The place-of-supply obstacle has been removed, but all five export conditions still have to be met:
- Supplier located in India.
- Recipient located outside India.
- Place of supply outside India — now satisfied for these services.
- Payment received in convertible foreign exchange, or in rupees where permitted.
- Supplier and recipient are not merely establishments of the same person.
Condition five is the one that now does the work that condition three used to. A subsidiary supplying its foreign parent is generally two persons; an Indian branch supplying its own overseas head office is not, and that supply is excluded from export treatment regardless of everything else. The distinction is legal structure, not commercial closeness.
See the five conditions in full, and the refund file for recovering the input credit that zero-rating makes claimable — which for a firm that has been treating its exports as domestic supplies is usually the larger number.
A practical sequence
- Confirm the five conditions on your actual contracts, not on how the arrangement is described internally.
- File a letter of undertaking so exports can be made without paying IGST — it is annual, and it has to be in place before the exports it covers.
- Fix the documentation — contracts, invoices, and evidence of receipt in foreign exchange.
- Assess input credit accumulating from 30 March 2026, which is now refundable.
- Separately, review open earlier periods on their own footing.
This is a working reference, not the statute, and this is a recent change. For anything you are relying on, confirm the amending provision and its commencement directly.