Intermediary Services GST Refund 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.
For years, Indian agents, sourcing offices and support centres working for foreign principals charged CGST and SGST even though they were paid in foreign currency. The Finance Act, 2026 changed that. From 30.03.2026, intermediary services to recipients abroad can qualify as exports, and so can be zero-rated with a refund of the credit behind them.
Section 13(8)(b) of the IGST Act was omitted with effect from 30.03.2026 by the Finance Act, 2026. Intermediary services now follow the default rule in section 13(2): the place of supply is the location of the recipient. If the recipient is abroad and the other section 2(6) conditions are met, the supply is an export of services, can be made under LUT, and the accumulated ITC can be claimed in RFD-01. The change is prospective: supplies before that date stay under the old rule.
What the old rule did
Section 13(8)(b) fixed the place of supply of "intermediary services" at the location of the supplier. An Indian intermediary with a foreign client therefore had its place of supply in India. Condition (iii) of the export definition failed, and the supply was taxed domestically, with CGST and SGST charged.
The provision was challenged. In Dharmendra M. Jani, the Bombay High Court (after a split verdict) upheld its validity, and the Gujarat High Court took the same view in Material Recycling Association of India. So until the law changed, the only escape was to show you were not an intermediary at all.
What changed on 30.03.2026
The GST Council recommended the omission at its 56th meeting (3 September 2025). The Finance Act, 2026 omitted section 13(8)(b) with effect from 30.03.2026. The ICAI background material summarises the result: intermediary services supplied to recipients outside India may now qualify as exports of services, subject to the other conditions, and become eligible for zero-rating.
| Point | Supplies before 30.03.2026 | Supplies on or after 30.03.2026 |
|---|---|---|
| Place of supply | Location of supplier (India) | Location of recipient (s.13(2)) |
| Export of services? | No | Yes, if all s.2(6) conditions met |
| Tax charged | CGST + SGST | Nil under LUT, or IGST with refund |
| ITC position | Used against domestic output tax | Refundable under Rule 89(4) if under LUT |
The same logic runs in reverse. An Indian business receiving intermediary services from a supplier abroad now has an import of services, which may attract GST under reverse charge. If you both give and receive such services, review both sides.
Who benefits
The ICAI analysis names IT and IT-enabled services, BPOs and other providers facilitating transactions for overseas clients, as well as consulting, sourcing and support arrangements. In practice this covers:
- buying and sourcing agents who find Indian vendors for foreign brands;
- commission agents who arrange sales for foreign principals;
- marketing and business-development offices of foreign groups that earn a commission or cost-plus fee;
- "support" entities whose contracts were read as facilitation.
If your business was treated as an intermediary and was paying GST on foreign-currency fees, you now have a route to zero-rating. Our LUT export refund team can map your contracts to the new position and set up the refund cycle.
Getting the refund: the steps
1. Test each contract against section 2(6). The place-of-supply hurdle has gone, but you still need a recipient located outside India, payment in convertible foreign exchange (or permitted INR), and a recipient that is not merely your own establishment abroad. Circular 161/17/2021-GST treats an Indian subsidiary and its foreign parent as separate persons, which helps group service entities.
2. File the LUT. File RFD-11 for the current financial year before issuing zero-rated invoices, and change the invoice format to the export endorsement.
3. Report correctly in returns. Zero-rated supplies go in the export tables of GSTR-1 and GSTR-3B, not as domestic taxable supplies.
4. Claim accumulated ITC in RFD-01. Use the Rule 89(4) formula. For services, zero-rated turnover is based on payments received in the period.
Illustration: A sourcing agent's quarter after the change: commission received from foreign principals ₹60 lakh, domestic fees ₹15 lakh, Net ITC ₹6 lakh.
- Refund = 60 × 6 ÷ 75 = ₹4.8 lakh.
- Before the change, the same ₹60 lakh would have carried output tax at the applicable rate (check the current rate schedule), and the ₹6 lakh ITC would simply have been set off against it.
Test your own figures on the GST refund calculator.
Transition points to watch
The date line is per supply. Only supplies made on or after 30.03.2026 benefit. Where a contract runs across the date, look at each invoice, the period of service and the dates of payment, and document which supplies fall on which side. Where the position is unclear, take advice before switching the tax treatment.
Invoices of 30–31 March 2026. These fall in FY 2025-26. If you had no LUT for that year, you either paid tax on them or face the question of an ex post facto LUT. The Refunds Handbook records that a delay in furnishing the LUT can be condoned where the export conditions are otherwise satisfied.
No retrospective refund. Tax correctly paid under the old rule on pre-30.03.2026 intermediary supplies does not become refundable because of the omission. The ICAI material notes it remains to be seen how disputes still pending before higher forums will be handled.
Businesses that were never intermediaries. If the department had treated you as an intermediary but you actually supplied on your own account, the older argument still matters for past periods. In Ernst and Young Ltd (Delhi HC, 2023), services supplied directly to foreign clients were held not to be intermediary services, and the ITC refund was allowed. Circular 159/15/2021-GST also clarifies the scope of intermediary services.
Inverted or mixed businesses. If you also have domestic supplies, your adjusted total turnover and the split of common credit will change once a large block of turnover becomes zero-rated. Rework the numbers rather than carrying last year's percentages forward.
Need help moving to zero-rating?
The first year after a change like this is where most errors happen: invoices issued in the old format, LUT filed late, or a refund built on invoices instead of receipts. We review the contracts, set up the LUT and invoicing, and file the RFD-01 claims. Start with our export refund under LUT service, or see the broader GST refund on exports page.
Key takeaways
- Section 13(8)(b) IGST was omitted with effect from 30.03.2026; intermediary services now use the default place-of-supply rule.
- Intermediary services to recipients abroad can now be exports, if all section 2(6) conditions are met.
- File the LUT and switch invoice formats; claim accumulated ITC through RFD-01 under Rule 89(4).
- The change is prospective. Supplies before 30.03.2026 remain under the old rule.
- Receiving intermediary services from abroad may now attract reverse charge.
Read next
- Intermediary services: place of supply and the section 13(8)(b) omission
- GST refund on export of services: conditions and filing
- GST refund for self-employed professionals exporting services
- Export without LUT: GST refund consequences
Disclaimer: Positions stated as on 30 September 2026, based on the CGST Act and Rules as amended, the Finance Act 2026, and the ICAI Handbook on Refunds under GST (January 2026). Verify current notifications before filing.