IGST 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.
For nine years, an Indian agent earning commission from a foreign principal paid 18% GST on it. Not because the service was consumed in India — it plainly was not — but because a single clause said the place of supply was wherever the supplier sat.
Section 157 of the Finance Act, 2026 deleted that clause. With effect from 30 March 2026, IGST section 13(8)(b) is omitted.
"Intermediary services" no longer appears in IGST s.13(8). Place of supply for an intermediary now falls to the residual rule in s.13(2) — the location of the recipient. Where the foreign recipient is outside India and the other s.2(6) conditions are met, the commission is an export of services and zero-rated. The change is prospective from 30.03.2026; periods before that are still governed by the old clause and the litigation around it.
What the clause used to do
Section 13 fixes the place of supply where the supplier or the recipient is outside India. Sub-section (2) is the default: the location of the recipient. Sub-sections (3) to (13) are the exceptions.
Sub-section (8) said the place of supply of the listed services is the location of the supplier. It listed three items:
- (a) services by a banking company, financial institution or NBFC to account holders;
- (b) intermediary services;
- (c) hiring of means of transport up to one month.
Clause (b) is what caught Indian agents. An "intermediary" under s.2(13) of the IGST Act is a broker, agent, or any person who arranges or facilitates a supply between two or more persons but does not supply it on their own account. Sales agents for foreign manufacturers, marketing representatives, freight and shipping agents, back-office arms that solicit customers, referral partners — all fell in.
Because the place of supply sat in India, the service failed s.2(6)(iii) of the IGST Act, which requires the place of supply to be outside India for an export. So the commission was an intra-State or inter-State domestic supply, taxed at 18%, with no refund and no zero-rating.
What changed
The Bare Law now shows sub-section (8) with clause (a), a deleted marker where (b) stood, and clause (c). The footnote reads: "Omitted vide the Finance Act, 2026, w.e.f. 30.03.2026. Prior to its omission it was read as '(b) intermediary services'."
Nothing was substituted in its place. Deletion from the exception list means the item returns to the default. Section 13(2) now applies: place of supply is the location of the recipient of services.
The export test still has to be met
Omitting the clause removes one obstacle. It does not make every commission an export. Section 2(6) still requires all five conditions:
- the supplier of service is located in India;
- the recipient is located outside India;
- the place of supply is outside India — this is the limb that just changed;
- payment has been received in convertible foreign exchange, or in rupees where the RBI permits;
- supplier and recipient are not merely establishments of a distinct person under Explanation 1 to s.8.
Condition 5 remains a live trap. An Indian branch or subsidiary facilitating for its own overseas group entity has to clear the distinct-person test on its own facts; the omission of 13(8)(b) does nothing for it.
Condition 4 also stays. Commission credited to a rupee current account of the foreign principal held in India is not automatically convertible foreign exchange.
Who this actually helps
| Business | Old position | From 30.03.2026 |
|---|---|---|
| Sales agent for a foreign manufacturer | 18% on commission | Export, zero-rated |
| Freight forwarding agency acting as agent | 18% on agency commission | Export, zero-rated |
| Marketing representative soliciting Indian customers for a foreign brand | 18% | Export, zero-rated |
| Referral partner paid by an overseas platform | 18% | Export, zero-rated |
| BPO supplying on own account (not an intermediary) | Already export | Unchanged |
The last row matters. A great deal of litigation was about whether a service was an intermediary service at all — Circular No. 159/15/2021-GST drew the line at whether the supplier facilitates between two others or supplies on its own account. That characterisation question loses most of its tax consequence going forward, because both answers now lead to the same place of supply.
Zero-rating: which route
Once the supply is an export, s.16 of the IGST Act gives two routes:
- Without payment of tax under a LUT in FORM GST RFD-11, then refund of unutilised ITC under Rule 89(4); or
- With payment of IGST, then refund of the tax paid under Rule 96.
For an agency business the input side is usually thin — rent, professional fees, software — so the LUT route often produces a small refund and the with-payment route produces a larger one. Run both on your own numbers before choosing.
The past is not reopened
The omission is prospective. For periods up to 29 March 2026 the old clause applies, along with the case law: the split verdict in Dharmendra M. Jani before the Bombay High Court, the Gujarat High Court's view in Material Recycling Association of India upholding the provision, and the many advance rulings that followed.
Practical consequence: a demand for FY 2021-22 on intermediary commission does not get answered by pointing at the 2026 omission. It gets answered on the pre-amendment law. What the omission does supply is a legislative acknowledgement that the deeming was anomalous — persuasive, not dispositive.
Key takeaways
- IGST s.13(8)(b) omitted w.e.f. 30.03.2026 by section 157 of the Finance Act, 2026.
- Place of supply for intermediary services now falls under s.13(2) — recipient's location.
- Commission from a foreign principal can now be an export of services, zero-rated.
- All five s.2(6) conditions still apply — the distinct-person bar in particular.
- The change is prospective; past periods are governed by the old clause.
- The "is it an intermediary?" characterisation fight largely loses its stakes going forward.
Read next
- Finance Act 2026: Every GST Amendment, and When Each One Starts
- Zero-Rated Supply: Exports and SEZ Under IGST
- Export of Services Under GST: Section 2(6) IGST
- LUT for Exports Without Payment of IGST
Disclaimer: Positions stated as on 5 September 2026, based on the Finance Act, 2026 and the ICAI Bare Law, 12th edition. Verify the current IGST Act text on cbic.gov.in.