GST Reset for Intermediaries: Zero-Rated Supplies, RCM on Imports, Pure Agency & ITC Reversals 

India’s long-debated GST treatment of intermediary services is on the cusp of a fundamental reset.

With the GST Council proposing to omit Section 13(8)(b) of the IGST Act, intermediary services supplied from India to overseas clients would now fall under the default place-of-supply rule. This means, subject to conditions, many such supplies could finally qualify as zero-rated exports – unlocking pricing competitiveness, access to ITC refunds, and better alignment with destination-based taxation. However, the flip side is equally significant, and it opens an under-appreciated set of dimensions to consider.

Once the amendment takes effect:
• Intermediary services procured from abroad for Indian businesses are likely to qualify as “import of services” and become liable to IGST under reverse charge, impacting cash flows and ITC planning.
• Reimbursements to foreign agents will need careful review under the “pure agent” rules to avoid unnecessary GST on pass-through costs.
• Branch Offices of foreign entities (as establishments of distinct persons) may face ITC reversals where their present intermediary services become exempt, unlike Indian private limited companies performing similar functions.

The above could materially impact cash flow, costs, and tax efficiency under GST.

In their latest article, “𝐆𝐒𝐓 𝐑𝐞𝐬𝐞𝐭 𝐟𝐨𝐫 𝐈𝐧𝐭𝐞𝐫𝐦𝐞𝐝𝐢𝐚𝐫𝐢𝐞𝐬: 𝐙𝐞𝐫𝐨-𝐑𝐚𝐭𝐞𝐝 𝐒𝐮𝐩𝐩𝐥𝐢𝐞𝐬, 𝐑𝐂𝐌 𝐨𝐧 𝐈𝐦𝐩𝐨𝐫𝐭𝐬, 𝐏𝐮𝐫𝐞 𝐀𝐠𝐞𝐧𝐜𝐲 & 𝐈𝐓𝐂 𝐑𝐞𝐯𝐞𝐫𝐬𝐚𝐥𝐬,” our Partner Stella Joseph, Principal Associate Yash K Desai and Associate Aradhya Singh discuss the above aspects in further detail.

Read the article here