Last updated: 14 August 2026. If you earn commission from a foreign company for arranging its sales in India, the place of supply of that service moved from your own address to your customer's on 30 March 2026, when section 157 of the Finance Act, 2026 omitted Section 13(8)(b) of the IGST Act. Where the recipient sits outside India, the supply can now qualify as an export and be zero-rated. The same change runs in reverse on commission you pay a foreign agent, which has become an import of service taxable in your hands under reverse charge.
Applicability Note: This guide reflects the IGST Act as in force on 14 August 2026. The omission of Section 13(8)(b) is recent and no CBIC circular on the transition had been issued as at this date. Always verify the current position on gst.gov.in or with a GST professional before acting.
Who Should Care?
- Commission agents and brokers billing overseas principals — the tax treatment of your core revenue changed this year.
- Marketing, sourcing and support arms of foreign groups whose refund claims were rejected on the ground that they were intermediaries.
- Any business that pays commission to a foreign agent — that payment now carries a reverse-charge liability it did not carry before.
- Anyone with an open notice, appeal or refund claim for a period before 30 March 2026, where the old rule still applies.
1. The Rule That Was Litigated for Eight Years
Section 13(8)(b) fixed the place of supply of intermediary services at the location of the supplier. For an Indian agent earning commission from a company abroad, that put the place of supply in India, in the same State as the supplier, making it an intra-State supply under Section 8(2) of the IGST Act — so CGST and SGST applied to money that had arrived from overseas in foreign currency. Export was out of reach by definition, because the third condition in Section 2(6) could never be met.
Two lines of challenge ran for years. The first attacked the provision itself and lost. In Dharmendra M. Jani v. Union of India (Bombay High Court, Writ Petition No. 2031 of 2018), a division bench split on 9 June 2021, and the third judge, Kulkarni J., resolved it on 18 April 2023 by upholding the provision, subject to its operation being confined to the IGST Act.
The second sidestepped the provision and argued the taxpayer was never an intermediary at all. It has done rather better. In K.C. Overseas Education Pvt. Ltd. (Bombay High Court at Nagpur, Writ Petitions Nos. 3914 and 4069 of 2024, judgment dated 3 March 2025), the court held that an Indian company contracting directly with foreign universities, invoicing them and being paid by them, supplies on a principal-to-principal basis and exports its service — helping students along the way does not convert it into an intermediary. The Supreme Court dismissed the department's petitions in Union of India v. K.C. Overseas Education Pvt. Ltd., SLP (C) Nos. 21104-21105 of 2025, by order dated 25 August 2025, and the Delhi High Court applied that reasoning in Fateh Education Consulting Private Limited v. Assistant Commissioner, W.P. (C) 17500/2025, decided 8 May 2026.
2. What Changed on 30 March 2026
Section 13(8)(b) of the IGST Act was omitted by section 157 of the Finance Act, 2026, which received Presidential assent on 30 March 2026, giving effect to a recommendation of the 56th GST Council meeting held on 3 September 2025. Section 157 is not among the sections that section 1(2) of that Act commences on 1 April 2026, and it carries no commencement provision of its own — so under Section 5 of the General Clauses Act, 1897 it operates from the date of assent.
With the deeming clause gone, intermediary services fall to the default in Section 13(2) — the location of the recipient. Where the recipient is outside India, the place of supply is outside India, and the third condition of Section 2(6) is satisfied for the first time.
Note what did not change. The definition of "intermediary" in Section 2(13) is untouched, and Circular No. 159/15/2021-GST dated 20 September 2021 still supplies the test: three parties at a minimum, two distinct supplies, and the intermediary not supplying the main service on its own account. What has changed is how much that classification matters. For a cross-border service under Section 13, principal and intermediary now land on the same place of supply. The label still decides your position for periods before 30 March 2026, but it no longer decides the tax head.
3. Export Is Not Automatic: The Five Conditions in Section 2(6)
Zero-rating does not follow from the place of supply alone. Section 2(6) of the IGST Act sets five conditions, all of which must hold together.
| Condition | What it means in practice |
|---|---|
| Supplier located in India | Straightforward for a domestic agent. |
| Recipient located outside India | The person you contract with and invoice — not the Indian customer your principal ends up selling to. |
| Place of supply outside India | Now satisfied under Section 13(2) for a recipient abroad. This is the condition the omission fixed. |
| Payment in convertible foreign exchange, or in INR where the RBI permits | INR received from a Special Rupee Vostro Account of a correspondent bank qualifies — Circular No. 202/14/2023-GST dated 27 October 2023. |
| Supplier and recipient not merely establishments of a distinct person | An Indian company billing the foreign group company it belongs to is not caught, because separately incorporated entities are not merely establishments of one person — Circular No. 161/17/2021-GST dated 20 September 2021. A branch or liaison office of the same legal entity is a different matter. |
The fourth and fifth conditions are where claims fail in practice. Document the remittance trail as you go, because a refund application will ask for it.
4. The Flip Side: Commission You Pay a Foreign Agent
The omission cuts both ways, and this half has had far less attention. Where an overseas broker or agent arranges business for you, the recipient is now in India, so the place of supply is in India under Section 13(2). That makes the commission an import of services under Section 2(11), and integrated tax is payable by you on reverse charge under Section 5(3) of the IGST Act read with Notification No. 10/2017-Integrated Tax (Rate) dated 28 June 2017. Under the old rule the place of supply was the foreign supplier's location, outside India, and no such liability arose.
Three compliance points follow, and they are easy to miss on a payment that used to be outside GST entirely:
- Self-invoice. A foreign supplier is not registered in India, so you raise the invoice yourself under Section 31(3)(f) of the CGST Act. Rule 47A gives you 30 days from the date of receipt of the service — inserted by Notification No. 20/2024-Central Tax dated 8 October 2024, in force from 1 November 2024.
- Time of supply. Under Section 13(3) of the CGST Act, it is the earliest of the date of payment in your books or bank, the day after sixty days from the supplier's invoice where the supplier issues one, or the date you issue your own invoice where that duty falls on you. Clauses (b) and (c) took their current form from 1 November 2024. Our guide to time of supply under GST works through this in more detail.
- Credit. The tax you pay is available as input tax credit where the service is used for your taxable supplies, subject to the conditions in Section 16. So for most businesses this is a cash-flow and paperwork question. Where your output is exempt, it is a real cost.
5. Claiming the Zero-Rating in Practice
Under Section 16 of the IGST Act you have two routes, and you choose one:
- Under a Letter of Undertaking, without paying tax. File Form GST RFD-11 under Rule 96A. The facility is open to all exporters except those prosecuted for evasion above the prescribed limit, per Notification No. 37/2017-Central Tax dated 4 October 2017, and an LUT covers the financial year in which it is furnished — so the FY 2026-27 LUT needed to be in place before you invoiced on this basis. Accumulated input tax credit is then refunded under Section 54(3) of the CGST Act.
- On payment of integrated tax, with refund of the tax paid. Section 16(4) of the IGST Act, in force from 1 October 2023, limits this route to notified classes; Notification No. 01/2023-Integrated Tax dated 31 July 2023 covers all goods and services other than the goods listed in its table, and services are not on that list.
Refund claims must be filed within two years of the relevant date under Section 54(1). For export of services, Rule 89(2)(c) requires a statement of invoices together with the Bank Realisation Certificate or Foreign Inward Remittance Certificate showing the proceeds actually came in. One procedural change to note: since 18 May 2026 the portal no longer accepts a PDF Annexure-B for refunds involving accumulated credit — the Excel offline utility is mandatory, with inward supplies listed invoice-wise and split into inputs, input services and capital goods (GSTN advisory dated 18 May 2026).
On the returns themselves, export invoices go into Table 6A of GSTR-1 and the zero-rated value into Table 3.1(b) of GSTR-3B; reverse charge on an imported commission goes into Table 3.1(d), with the credit taken in Table 4. For monthly filers, GSTR-3B for July 2026 is due Thursday, 20 August 2026, the same date as GSTR-5A for OIDAR providers.
6. Periods Before 30 March 2026 Are a Separate Question
The omission is not retrospective on its face, and section 157 carries no saving clause. Commentary is genuinely split on what that means, and it is worth knowing both readings before you decide how to handle an open file:
- Prospective only. Liabilities already accrued survive an omission by force of Section 6 of the General Clauses Act, 1897, so supplies made up to 29 March 2026 stay governed by Section 13(8)(b) and existing demands stand.
- Past demands should fall. Because no saving clause was enacted, pending demands and rejected refunds ought to go with the provision. This position is argued in practice but has not been tested in a reported ruling.
The safer ground for an older period is usually the classification argument rather than the omission: if the K.C. Overseas reasoning fits your facts — a direct contract with the foreign customer, your own invoice, your own consideration — you were never an intermediary, and the old place-of-supply rule never applied to you at all. See our guide to place of supply under GST for how Sections 12 and 13 fit together.
No CBIC circular on the transition had been issued as at 14 August 2026, and the GST portal's News and Updates feed carries nothing on it. Until one appears, treat supplies straddling 30 March 2026 with care.
Key Takeaways
- Section 13(8)(b) was omitted by section 157 of the Finance Act, 2026 with effect from its assent on 30 March 2026, following the 56th GST Council meeting of 3 September 2025. Intermediary services now follow Section 13(2) — the recipient's location.
- Zero-rating still has to be earned. All five conditions in Section 2(6) must hold, including receipt in convertible foreign exchange, or in INR through a Special Rupee Vostro Account per Circular No. 202/14/2023-GST dated 27 October 2023.
- Commission paid to a foreign agent is now an import of service taxable under reverse charge, with a self-invoice due within 30 days of receipt under Rule 47A.
- Choose your export route deliberately — LUT in Form GST RFD-11 with a refund of accumulated credit, or payment of IGST with refund of the tax. The LUT runs for the financial year.
- Pre-30 March 2026 periods are unsettled. The stronger argument there is usually that you were never an intermediary, on the K.C. Overseas line, left standing by the Supreme Court when it dismissed the department's petitions on 25 August 2025.
Frequently Asked Questions
Is commission earned from a foreign company now exempt from GST?
Not exempt — zero-rated, which is better. From 30 March 2026 the place of supply is the recipient's location under Section 13(2), so the supply can qualify as an export under Section 2(6) and be made without tax under an LUT, with the input tax credit still refundable. Exempt supplies, by contrast, carry no credit.
Does it still matter whether I am an intermediary or a principal?
For a cross-border service supplied on or after 30 March 2026, the classification no longer changes the place of supply — both routes lead to Section 13(2). It still decides your position for earlier periods, and Circular No. 159/15/2021-GST dated 20 September 2021 remains the test.
Do I have to pay GST on commission I pay to an agent abroad?
Yes. Since the place of supply is now in India, it is an import of services under Section 2(11) and integrated tax is payable by you on reverse charge under Section 5(3) of the IGST Act read with Notification No. 10/2017-Integrated Tax (Rate) dated 28 June 2017. Issue a self-invoice within 30 days of receiving the service under Rule 47A, and claim the credit if the service supports your taxable supplies.
Can I claim a refund for GST paid on intermediary services in earlier years?
It depends on the basis of the claim. The omission itself is prospective on its face and carries no saving clause, and the two readings of that are set out above. A claim resting on the argument that you were never an intermediary — a direct contract with, invoice to, and payment from the foreign customer — stands on the K.C. Overseas line of authority and is independent of the amendment. Refund claims remain subject to the two-year limit in Section 54(1).
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. GST rules are subject to frequent changes through notifications and circulars. Please consult a qualified tax professional or verify the current provisions on the official GST portal (gst.gov.in) before making any compliance decisions.
Have a specific question about intermediary services or export refunds? Our GST experts can help → gstconsultancy.com