Section 13 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The sub-section that put the place of supply at the supplier's location lost its most contested clause in March 2026. Two clauses remain, and both are narrower than they look.
Section 13(8): the place of supply of the following shall be the location of the supplier of services — (a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) ; (c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month. Clause (b) — "intermediary services" — was omitted by the Finance Act, 2026, with effect from 30.03.2026. The Explanation defines "account" as an account bearing interest to the depositor, including a non-resident external account and a non-resident ordinary account, and defines banking company and financial institution by reference to the Reserve Bank of India Act, 1934.
Why section 13(8) is unusual
Every other rule in s.13 keys to the recipient, the performance, or the property. Section 13(8) keys to the supplier.
The consequence for an Indian supplier is decisive: where s.13(8) applies, the place of supply is in India, so the supply is not an export — however foreign the customer, and however the payment is received.
That is what made clause (b) so contested, and its omission is the single largest place-of-supply change in years. Intermediary services omitted →
Clause (a): banking to account holders
Three limbs to satisfy, and each narrows it.
1. The supplier must be a banking company, a financial institution, or a non-banking financial company.
The Explanation defines these by reference to the RBI Act, 1934 — "banking company" as in s.45A(a), and "financial institution" as in s.45-I(c), which covers a financial institution which is a company, a non-banking institution which is a company whose principal business is receiving deposits or lending, and such other non-banking institutions or classes as the RBI may specify with the Central Government's previous approval by notification.
2. The recipient must be an account holder.
3. "Account" means an account bearing interest to the depositor, and includes a non-resident external account and a non-resident ordinary account.
That third limb is the narrowest. The account must bear interest to the depositor. So:
- a savings account or an interest-bearing deposit — within it;
- a current account bearing no interest — arguably outside the definition, and therefore outside clause (a);
- NRE and NRO accounts — expressly included.
Where clause (a) does not apply, the service falls to the s.13(2) default — the recipient's location — which for a foreign customer is outside India, opening the export analysis.
So an Indian bank's services to a foreign customer divide: services to an account holder on an interest-bearing account are taxed here under clause (a); other services to foreign recipients fall to s.13(2). The characterisation therefore drives the bank's export position on its non-resident business.
Clause (c): short hiring of means of transport
"Services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month."
Three qualifiers, and each matters.
"Hiring of means of transport." Not transportation of goods or passengers — the hire of the means itself. A car, a bus, a truck, equipment on hire.
"Including yachts but excluding aircrafts and vessels." A yacht is in; an aircraft and a vessel are out. So chartering an aircraft or a ship is not within clause (c), and falls to the s.13(2) default — the recipient's location.
"Up to a period of one month." A hire exceeding one month is outside clause (c), and also falls to s.13(2).
So the clause captures a narrow band: short-term hire of ground transport and yachts. Everything else — long-term hire, aircraft, vessels — is determined by the recipient's location.
The practical consequence: an Indian company hiring a vehicle abroad for under a month receives a supply with its place of supply at the foreign supplier's location — outside India, so no reverse charge. The same hire for two months falls to s.13(2), place of supply in India, and reverse charge applies.
A one-month line with a real tax consequence, and one that contract terms determine.
What the omission of clause (b) changed
Before 30.03.2026: intermediary services had their place of supply at the supplier's location. So an Indian intermediary serving a foreign principal had a place of supply in India — the supply was not an export, and Indian tax applied.
From 30.03.2026: intermediary services fall to the default in s.13(2) — the location of the recipient. So an Indian intermediary serving a foreign principal now has a place of supply outside India, and the supply can be an export of services subject to the other s.2(6) conditions.
The conditions that remain to be satisfied are the ones that always applied to any export of services:
- the recipient is located outside India;
- payment in convertible foreign exchange, or in Indian rupees where the RBI permits;
- and the supplier and recipient are not merely establishments of a distinct person under Explanation 1 to s.8.
That last condition is the one that still catches intra-group arrangements — an Indian entity providing intermediary services to its own foreign parent or affiliate must test whether the two are establishments of distinct persons or separate legal persons. Establishments of distinct persons → Export of services →
And the periods matter. The omission takes effect from 30.03.2026. For periods before it, clause (b) applied, and demands or refund claims for those periods are governed by the law as it stood then — which is why the effective date has to be applied period by period rather than assumed forward or backward.
Key takeaways
- Section 13(8) is the only rule in s.13 keyed to the supplier's location, so it defeats an export.
- Clause (b) — intermediary services — was omitted w.e.f. 30.03.2026, sending them to the s.13(2) default.
- Clause (a) requires a banking company, financial institution or NBFC, an account holder, and an account bearing interest to the depositor — NRE and NRO accounts expressly included.
- Clause (c) covers short hire of means of transport, including yachts but excluding aircraft and vessels, up to one month.
- A hire exceeding one month, or of an aircraft or vessel, falls to s.13(2) — the recipient's location.
- The omission's effective date must be applied period by period.
Read next
- Intermediary Services: Place of Supply After the 2026 Omission
- Export of Services: The Five Conditions in Section 2(6)
- Establishments of Distinct Persons and the Export Bar
- Section 13(2): The Default Cross-Border Rule
Disclaimer: Positions stated as on 5 September 2026, based on the IGST Act as amended to 31 March 2026 (ICAI Bare Law, 12th edition). The omission of section 13(8)(b) takes effect from 30 March 2026 and the earlier position governs periods before that date.