Finance Act 2026 Seen as Key to Unlocking Rs 4,000 Crore in GST Refunds for Indian Intermediaries

Indian Intermediary Services Companies to Save Big on Taxes

In a significant move, the Finance Act 2026 has amended the law governing Goods and Services Tax (GST) to benefit Indian companies providing intermediary services to foreign clients. According to the amendment, the place of supply for intermediary services shall be "the location of the recipient of such services," effectively recognizing these services as exports.

This change has the potential to free up Rs 4,000 crore stuck in litigation, as per tax consultants. Intermediary services, which include back-office support, sales, and travel arrangements, have long been a contentious issue in the GST regime. The amendment will now allow businesses to claim GST refunds on services provided for customers abroad.

Key Impact on IT and ITeS Sector

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The IT and IT-enabled services (ITeS) sector, which employs over 5.4 million Indians, will be the primary beneficiary of this amendment. Companies like Genpact India and Ernst & Young (EY) had to approach the High Courts to challenge the rejection of their GST refund claims and urge for an export status for the BPO industry.

The amendment primarily benefits companies providing intermediary or sourcing services to overseas clients, ensuring their cross-border services are correctly recognized as exports for GST purposes. Tax consultants say that the treatment of a service as intermediary service or otherwise has been a major area of litigation, with authorities often reclassifying service contracts to deny export status and refunds.

Changes to GST Law

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The Finance Act 2026 has changed Section 13(8) of the IGST Act, determining the place of supply for intermediary services basis the customer's location. This has been a long-standing issue, with authorities trying to reclassify several service contracts as intermediary services to deny export benefits. The amendment will now allow Indian intermediaries to provide services to overseas customers without attracting GST.

Tax consultants say that the amendment comes as a big relief, especially in times of geopolitical uncertainty. Efforts were made by the government to clarify what constitutes an intermediary or otherwise, but litigation on this issue continued over the years. The amendment in Section 13 has finally brought clarity to this contentious issue.