GST on Intermediary Services What’s Changing in 2025?
The GST Council is reportedly considering a major relief for intermediary services by treating them as exports, not domestic supplies. This change could finally end the 18% GST burden that has long troubled BPOs, KPOs, and consulting firms serving foreign clients.
This amendment could also resolve over ₹3,357 crore in GST show-cause notices issued to intermediaries over classification disputes.
Let’s break this down.
What Are Intermediary Services Under GST?
As per Section 2(13) of the IGST Act:
“An intermediary means a broker, agent or any person who arranges or facilitates the supply of goods or services or both, between two or more persons…”
Currently:
- Intermediaries are not treated as exports, even when serving overseas clients.
- GST is charged at 18%, as the place of supply is deemed to be India under Section 13(8)(b) of the IGST Act.
What Might the GST Council Change?
If accepted, the Council’s proposal may:
- Reclassify intermediary services as exports (zero-rated).
- Override Section 13(8)(b) through a clarification or amendment.
- Align Indian GST rules with international trade norms and WTO principles.
Who Will Benefit?
This move could significantly benefit:
- BPO/KPO firms
- Consultants and IT support providers
- Export-oriented MSMEs
- Freelancers working with global clients
Why Is This a Game-Changer?
| Current Position | Proposed Change |
|---|---|
| Treated as domestic supply | To be treated as export |
| GST @18% payable by intermediary | No GST (zero-rated) |
| Place of supply = India | Place of supply = recipient’s location |
| Heavy litigation (₹3,357 crore) | Likely withdrawal of SCNs |
Legal Angle: Background & Disputes
Several High Court rulings have challenged the constitutionality of Section 13(8)(b). For example:
- Dharmendra M Jani vs UoI (Bombay HC) – Split verdict.
- Material Recycling Association of India vs UoI (Madras HC) – Upheld provision.
Despite such legal uncertainty, the GST Council has yet to clarify definitively — until now.
Expert Tip: Align with Export Compliance Early
According to CA Parul Gupta:
“Firms currently paying 18% GST should prepare documentation to demonstrate export nature of services — contracts, invoice currency, foreign inward remittances — in case the rule changes are made retrospective.”
What Should You Do Now?
✅ Review whether your service falls under ‘intermediary’ as per IGST Act
✅ Preserve all documents that prove export of services
✅ Wait for official notification or amendment post Council meeting
✅ Consider legal representation if you’ve received SCNs under Section 13(8)(b)
FAQs on GST for Intermediary Services
Q1: Will this benefit apply retrospectively?
A: Not yet confirmed, but retrospective relief could be part of the final Council decision.
Q2: What if I’m already under litigation?
A: Relief may apply to pending cases; consult your GST advisor for case-specific guidance.
Q3: Will freelancers benefit from this?
A: Yes, if they are facilitating foreign clients and currently classified as intermediaries.
Summary
GST Council may grant export status to intermediary services, ending 18% GST burden and resolving ₹3,357 crore in pending disputes. Relief likely for BPOs, consultants, and freelancers.