Budget 2026-27 changes the tax landscape for intermediary services

The article was first published in Business Today on 10 February 2026. Please click here to read the article.

GST shift in Budget 2026‑27

India’s indirect tax regime has entered a decisive new phase with the Union Budget 2026–27 formally enacting the GST Council’s long-awaited recommendation on intermediary services. In a landmark shift, the place of supply for such services has been aligned with the general rule – anchored to the recipient’s location rather than the supplier’s. 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 industry

Indian intermediaries

Previously subject to an 18 percent GST, intermediary services supplied to overseas clients now stand 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 end to a long-drawn debate on export v/s intermediary for Indian service providers
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 to non-business recipients such as unregistered entities or individuals. In such scenarios, taxability may be triggered through compulsory registration to discharge liability under RCM, particularly where the services are availed for business purposes. This creates a need for greater clarity on the scope of obligations and the additional compliance requirements that Indian service recipient may face under the revised regime.

The broader implications extend across digital platforms, online consulting, and cross‑border brokerage services, where overseas intermediaries have historically faced limited tax exposure. The shift may drive these entities to revisit pricing, contracts, and delivery models to align with India’s revised GST framework.

Conclusion

This reform marks a pivotal milestone in India’s GST framework, as it finally grants export benefits to Indian intermediaries by aligning the place of supply with the recipient’s location. It addresses structural imbalances, enhances global competitiveness, and streamlines compliance for Indian service providers, particularly in sectors such as ITeS, but also streamlines compliance by removing ambiguity that has historically led to disputes. On the other hand, the shift fundamentally alters the tax landscape for overseas intermediaries. Together, these changes create a more level playing field between domestic and foreign service providers, while reinforcing India’s position as a reliable hub for cross-border services.