Budget 2026-27 Rewrites GST for Intermediary Services
Budget 2026-27 Rewrites GST for Intermediary Services
Budget 2026-27 aligns place-of-supply for intermediary services with the recipient's location, reshaping cross-border tax rules for Indian and overseas providers.
India’s indirect tax regime has entered a decisive phase with the Budget 2026–27 formally enacting the GST Council’s recommendation on intermediary services. In a landmark shift, the place of supply for such services is now aligned with the general rule—anchored to the location of the recipient rather than the supplier. While the legislative intent has been crystallised in the Budget, the reform will take effect once the Finance Act, 2026, comes into force, marking a significant step toward clarity and consistency in cross-border taxation.
Impact on Indian Intermediaries: Previously subject to an 18% GST, intermediary services supplied to overseas clients are now reclassified as exports—removing the levy and enabling input tax credit refunds. This legislative shift affirms India’s destination-based tax framework, corrects structural distortions in cross-border trade, and strengthens the global competitiveness of its service exporters. This brings an end to a long-drawn debate on export v/s intermediary for Indian service providers.
Impact on Overseas Intermediaries: A critical dimension of the reform lies in the treatment of overseas intermediaries, who until recently enjoyed a relative tax advantage under the earlier framework. With the Union Budget 2026–27 legislating the shift in place-of-supply rules, services provided by such intermediaries to Indian recipients will now come within the ambit of GST. This change fundamentally alters the compliance landscape, requiring both Indian service recipients and foreign intermediaries to reassess their tax obligations, contractual structures, and cost models in light of the new regime. For B2B transactions, the GST liability is expected to rest with the Indian service recipient under the Reverse Charge Mechanism (RCM), with input tax credit available subject to the fulfilment of prescribed conditions. The framework, however, becomes more complex in the case of services provided.
