Summary
Foreign clients don’t always mean zero GST. Under Indian GST law, intermediary services to overseas clients are not exports and attract 18% GST. Here’s what businesses need to know to avoid surprises.
GST on Intermediary Services: Foreign Earnings Still Taxable
Many Indian service providers assume that working with foreign clients automatically qualifies them for zero-rated export benefits under GST. But here’s the catch—if you’re classified as an ‘intermediary’, GST still applies at 18%, even when your client is outside India.
Let’s break this down clearly.
What is an ‘Intermediary’ Under GST?
As per Section 2(13) of the IGST Act, 2017, an intermediary is:
“A broker, agent or any other person who arranges or facilitates the supply of goods or services between two or more persons, but does not include a person who supplies such goods or services on his own account.”
So, if you’re acting as a link between two parties but not delivering the core service or goods yourself, you’re an intermediary.
Why GST is Still Charged on Foreign Intermediary Services
Normally, exports of services are zero-rated under GST (Section 16 of IGST Act). However, intermediary services are treated differently due to the place of supply rules.
As per Section 13(8)(b) of IGST Act:
The place of supply for intermediary services is the location of the supplier (i.e., in India).
✅ So even if your client is abroad,
❌ your service is not considered an export under GST.
Practical Impact: You Must Charge 18% GST
Example:
You are a consultant in India helping a US company find suppliers in India.
- ✅ Client: Outside India
- ❌ Place of Supply: Still India (your location)
- ✅ GST: You must charge 18% IGST on your invoice
This has been upheld in multiple cases and clarified by CBIC time and again.
Key Legal References
- IGST Act Section 2(6) – Defines export of services
- IGST Act Section 13(8)(b) – Place of supply rules for intermediaries
- CBIC Circular No. 159/15/2021-GST dated 20.09.2021 – Reconfirms place of supply for intermediary services
- Supreme Court in M/s. Northern Operating Systems Pvt. Ltd. (2022) – Indirectly touched on cross-border service rules
CBIC Clarification: No Export Benefits for Intermediaries
According to Circular No. 159/15/2021-GST:
“If the supplier of intermediary services is located in India, the place of supply shall be the location of the supplier… even if the recipient is outside India.”
This means:
- You can’t claim export exemptions
- You can’t claim refund of input GST under export norms
- You must issue a GST invoice and pay tax
Expert View: What Can You Do?
“Many Indian freelancers and agencies fall into the intermediary trap unknowingly. If you want zero-rated export benefits, you must deliver the service yourself — not just coordinate or facilitate it.”
— Anil Rao, Indirect Tax Consultant
📌 Tip: Rework contracts to ensure your role is principal-to-principal, not intermediary.
How Intermediary is Different from Exporter of Service
| Feature | Exporter of Service | Intermediary |
|---|---|---|
| Client Location | Outside India | Outside India |
| Supplies the Service? | Yes | No (just facilitates) |
| Place of Supply | Outside India | India (supplier’s location) |
| GST Applicable | No (Zero-rated) | Yes (18% GST) |
| Input Tax Refund Allowed? | Yes | No |
Common Misunderstandings
- “My client is abroad, so I don’t have to pay GST.” ❌
- “I send dollars to my account, so it’s export.” ❌
- “I’m just connecting two parties, no need to pay tax.” ❌
Truth: Under GST, how you serve matters more than who you serve.
FAQs
Q1. Can I restructure my contracts to avoid intermediary classification?
Yes, if you’re delivering the service directly and not merely arranging it.
Q2. Can I raise an invoice in foreign currency and still pay GST?
Yes. Invoice currency doesn’t exempt you from GST if you’re an intermediary.
Q3. Can I claim input credit on GST paid?
Yes, but no refund under export rules. Use credit for other GST liabilities.
Final Words: Stay Compliant, Stay Ahead
Working with global clients is great — but don’t ignore GST rules on intermediary services. Ensure your contracts, invoices, and tax filings are aligned.