Global Capability Centres (GCCs) and service exporters, the Finance Act 2026 provides relief for the IT companies by eliminating the intermediary clause under the Integrated Goods and Services Tax Act (IGST Act), solving a tax issue that impacted export benefits for service providers.
Under the earlier norms, many service providers were categorized as “intermediaries”, which specifies that the “place of supply” was deemed the supplier’s location in India instead of the client’s location overseas.
This classification often led to services being considered as domestic supplies rather than exports, resulting in the denial of export benefits and GST refunds.
Revision of the Place of Supply Rule
With the change under the Finance Act 2026, the place of supply for intermediary services shall now be changed to the location of the receiver rather than the location of the supplier. It shows that services furnished before foreign clients shall not be entitled as exports.
Therefore, these services shall be qualified for zero-rating benefits and Input Tax Credit (ITC) refunds, which enhances cash flows for service exporters.
Relief After GST Scrutiny
The decision has arrived after heightened GST scrutiny on GCCs and multinational subsidiaries in recent years, where authorities had asked whether services furnished to overseas group companies were entitled as exports or must be clarified as intermediary services.
Because of intermediary categorisation, genuine export transactions had encountered GST notices, investigations, and litigation. For sectors such as IT services, R&D centres, consulting firms, and back-office operations, it creates uncertainty.
Clarity for Service Exporters
The removal of the ambiguous intermediary clause is expected to bring much-needed clarity and reduce tax disputes for service exporters. This change is especially important for India’s large IT services sector and the expanding GCC ecosystem, both of which provide services to global clients and parent companies.
Read Also: Karnataka HC: Education Services Fall Outside the ‘Intermediary’ Definition; GST Refund Allowed
The revision is anticipated to enhance the streamlined operations of business, reduce litigation, and strengthen India’s role as a global hub for technology, research, consulting, and shared services exports.
