CLAUSE BY CLAUSE ANALYSIS OF PROPOSED GST AMENDMENTS (PART-3)

Following is the snapshot of GST related changes (IGST) in the Finance Bill, 2026 (FB):

Amendment in IGST Act, 2017

Section 13: Place of Supply of Intermediary Services (Clause 141 of Finance Bill, 2026)

Clause 141 of the Finance Bill, 2026 provides as follows:

In section 13 of the Integrated Goods and Services Tax Act, 2017, in sub-section (8), clause (b) shall be omitted.

Accordingly, clause (b) of sub-section (8) of section 13 of the Integrated Goods and Services Tax Act, 2017 is being omitted so as to provide that the place of supply for 'intermediary services' will be determined as per the default provision under section 13(2) of the IGST Act.

Note on Clauses to Finance Bill, 2026 provide objective of amendment as to omit clause (b) of sub-section (8) of section 13 of the Integrated Goods and Services Tax Act, 2017 so as to provide that the place of supply for “intermediary services” shall be determined as per the provisions of sub-section (2) of section 13 of the said Act, which is the location of the recipient of such services.

Presently, according to section 13 of the IGST Act 2017, place of supply of services where location of supplier or location of recipient is outside India is determined as per such provisions covering different services and situations. According to sub-section 8(b), place of supply of intermediary services shall be the location of supplier of services. However, as per default provision in terms of sub-section (2), place of supply of services except the specific exclusions carved out in sub-section (3) to (13) of section 13, shall be the location of the recipient of services.

While it is a globally accepted principle that for exporting goods or services, taxes should not be exported i.e., exempt or free from taxes, in case of services provided by intermediary, this rule was being distorted as the place of supply was determined on the basis of location of service supplier or provider, i.e., intermediary. There have been numerous disputes on the same in the past, both under service tax regime as well as in GST regime.

The Finance Bill, 2026 thus seeks to correct this anomaly by removing the exception clause in relation to place of supply for intermediary services. Post amendment, there will be no exception to general rule of determining place of supply based on location of recipient of service. Therefore, if the supplier (intermediary) is in India and recipient is outside India, it is a case of export and place of supply shall be considered as being outside India and it would not be subject to levy of tax and/or become a case for tax refund. It may be noted that in case of import of services, tax shall be payable as recipient would have location in India.

Who is an ‘intermediary’ has been defined in section 2(13) of the IGST Act, 2017. Accordingly, “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.

This is indeed a welcome amendment and will settle disputes for future. It would have been ideal to have made this applicable retrospectively. The same is proposed to apply from a notified date after enactment of Finance Bill, 2026.

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Dr. Sanjiv Agarwal

FCA, FCS, D.Litt.