GST on Intermediary Services May See Big Relief Export Status Likely
The GST Council may soon deliver a long-awaited relief to India’s intermediary services sector. According to recent media reports, the Council is actively considering granting “export” status to intermediary services, a move that could eliminate the 18% GST burden on such transactions.
Currently, even when Indian intermediaries provide services to foreign clients, GST applies — making them costlier and less competitive. But if classified as exports, these services would become zero-rated under GST.
Let’s break this down.
What Are Intermediary Services Under GST?
As per Section 2(13) of the IGST Act, 2017, intermediary means a broker, agent, or any person who arranges or facilitates the supply of goods/services between two or more persons, without supplying such goods/services themselves.
Examples:
- BPOs facilitating sales between foreign firms and Indian buyers
- Consultants connecting overseas businesses with Indian service providers
- Agents earning commission on international deals
Currently, these services are taxed at 18%, even if the recipient is outside India — because they don’t qualify as “exports” under existing GST rules.
Why This Matters: Industry Pain Points
- No export status = No zero rating
- Ineligible for refund of input tax credit (ITC)
- Makes Indian intermediaries uncompetitive globally
- Leads to tax cascading on international service flows
Likely GST Council Relief: Export Status + Zero Rating
As per reports from government officials, the GST Council may redefine export criteria to include intermediary services. This could bring:
✅ Zero-rated status under Section 16 of IGST Act
✅ No 18% output tax liability
✅ Refund of input tax credit (ITC)
✅ Boost to India’s services exports and startup ecosystem
💡 Expert View: “Recognising intermediary services as exports is critical to align GST with global trade norms. Countries like the UK and Singapore already zero-rate such services.” — Indirect Tax Consultant
Legal and Policy Basis
- Current Issue: Place of supply under Section 13(8)(b) deems location of service provider (i.e., India) as the place of supply for intermediary services, making it taxable.
- Proposed Fix: Amend Section 13(8)(b) or issue a GST Council clarification/circular under Article 279A of the Constitution.
This would align GST interpretation with international best practices and trade facilitation norms under WTO guidelines.
Snapshot: Current vs Proposed GST Treatment
| Particulars | Current Rule | Proposed Relief |
|---|---|---|
| GST Rate | 18% | 0% (zero-rated) |
| ITC Refund | Not allowed | Allowed |
| Export Tag | Not eligible | Eligible |
| Global Competitiveness | Low | High |
| Place of Supply | India | Outside India |
Practical Impact on Businesses
If notified, the move will benefit:
- BPOs/KPOs handling foreign contracts
- Freelance professionals with overseas clients
- Commission agents earning in foreign currency
- Tech platforms acting as intermediaries in cross-border deals
What Should You Do Now?
✅ Review your contracts to confirm if you fall under intermediary definition
✅ Track upcoming GST Council announcements
✅ Consider restructuring contracts to highlight principal-to-principal service relationships
✅ Consult a tax expert to plan refund claims or reclassification strategies
FAQs on Intermediary GST Changes
Q1. Will all export services become zero-rated?
Only intermediary services may get export status. Existing export services already enjoy zero-rating.
Q2. Is the 18% GST still applicable now?
Yes, until a formal GST Council notification or amendment is issued.
Q3. Can past taxes be refunded if export status is granted?
Not automatically. Refund eligibility depends on notification scope, timing, and ITC trail.
Summary for Google Snippet
GST Council may soon classify intermediary services as exports, removing the 18% GST burden. This reform would zero-rate such services, boost competitiveness, and allow ITC refunds—especially benefiting Indian BPOs, consultants, and freelancers with foreign clients.
Final Thoughts
If the GST Council formalises this proposal, it could be a game-changer for India’s global service economy. At Efiletax, we’re tracking every move — so you don’t miss a compliance beat.