Cross-Border Intermediary Services: A GST Change Businesses Should Review Now
The GST amendment has introduced a new tax system for businesses that act as intermediaries in transactions between an Indian entity and an overseas entity.
Before the 29th of March 2026, any intermediary service provider who resided in India and dealt with a foreign client was liable for GST. This would have held even if the client were from India. This is because the service was provided at the location of the service provider in India.
The Finance Act 2026 amended this special provision. After 30 March 2026, the usual provision will apply: the place of supply is normally the place where the service is supplied to the customer. As a result, intermediary services provided by an Indian company to an international customer may qualify as exports of services if the other requirements for exporting services are met.
It will enable the removal of GST at 18% on services that were taxable in India. This could therefore enhance the competitiveness as well as the profitability of Indian businesses serving foreign clients.
A common example: an Indian sales agent for a foreign company
Consider an Indian company that an overseas manufacturer authorizes to seek out customers in India, meet with them, and help secure orders. The overseas manufacturer delivers the goods directly to the Indian clients and gives a commission to the Indian company.
The Indian company is not selling the products itself. It is assisting two other parties in completing the deal, namely the foreign manufacturer and the Indian buyer. The nature of its activity, therefore, is most likely to be intermediary services.
Under the earlier rule, the commission was liable for GST in India. Under the new rule, the place of supply would fall outside India because the customer who paid for and received the agency’s services is located outside India. Provided that other criteria are met, the commission could be considered export revenue.
The reverse side: commission paid to an overseas agent
The same amendment will expose Indian businesses to a new GST liability.
Consider a situation in which the Indian manufacturer uses an overseas agent to find potential customers abroad and to negotiate export deals with them. The overseas agent finds buyers, negotiates with them, and earns a commission on exports.
The overseas agent is providing intermediary services to the manufacturer from India. As the recipient of the service is in India, the place of supply would normally be in India. Therefore, the service can be treated as an import of services, and the company based in India would have to pay IGST under the reverse charge mechanism. The reverse charge notification generally shifts the tax burden to the recipient company in India for services provided from outside India.
Another typical case involves an overseas purchasing agent appointed by an Indian business entity to find foreign vendors, get quotations, and procure goods. The commission charged to such a purchasing agent may also result in reverse-charge GST.
The input tax credit may sometimes be claimed, depending on the standard conditions. However, even with such possibilities for claiming the input tax credit, the business will first have to determine its tax liability and report it in its GST returns. If not possible, the tax becomes a cost.
The agreement alone will not decide the treatment.
The use of phrases such as “consultant,” “marketing consultant,” or “business consultant” does not make a service an intermediary service. It is the nature of the services provided that matters most of all.
A person who only brings two people together to make a transaction may be considered an intermediary. A person who conducts research, engineering, accounting, data processing, and/or other comprehensive activities as a comprehensive entity may not be.
However, it is important that the business analyzes both the supply of services to foreigners and the commission paid to the foreign agent. All agreements, invoices, activities, and GST reporting must reflect the reality of the transactions.
The amendment provides a real advantage to some Indian service exporters. It could, however, result in the imposition of reverse charge on those sums that were not considered GST by Indian firms. Proper evaluation would enable you to get the upper hand.
Next Steps: Compliance and Strategy
With these changes in effect, businesses must start their work immediately. First, they must identify any foreign business dealings to determine whether intermediaries are involved. Next, one should review all current agreements and payment processes to determine whether the documentation aligns with the work performed.
Importantly, consider the impact of the reverse charge system on your cash flow and qualify for the Input tax credit to prevent cost losses. Moreover, the exporter must provide proof for their claim of zero-rating. Getting your taxes sorted in advance will help you avoid any fines and enable you to make use of any new tax efficiency benefits.