Is Your Agency an "Intermediary" Under GST? What Actually Changed in 2026

Section 13(8)(b) of the IGST Act is gone. Section 157 of the Finance Act, 2026 (Act No. 4 of 2026) omitted it, following Presidential assent on 30 March 2026 — prospective only, so nothing before that date changes. Past assessments, demands, and pending litigation are not automatically resolved by the omission. Before this, if your agency's service was classified as "intermediary," the place of supply was deemed to be India regardless of where your client sat. That meant 18% GST on foreign earnings and no export zero-rating, even when the money arrived entirely in foreign exchange through proper banking channels. Now that clause is gone, and intermediary services fall back to the general rule under Section 13(2): place of supply follows the recipient. One practitioner caveat worth noting before you change your invoicing: the majority reading is that the omission is effective from the assent date of 30 March 2026, since the Act contains no deferred commencement provision for it. A minority view holds that the operative date awaits separate CBIC notification. Check CBIC notifications for anything issued after this post's last-updated date before you act on it. If your client is abroad, that can make the service an export under Section 2(6) — and exports are zero-rated under Section 16. Note the sequence: Section 2(6) defines what qualifies, Section 16 is what zero-rating does once it does. All five Section 2(6) conditions still have to hold: supplier in India, recipient outside India, place of supply outside India (the part that just changed), payment in convertible foreign exchange, and the two parties not merely establishments of a distinct person.

Here's the part most coverage of this change skips: it only helps you if you were classified as an intermediary to begin with. The definition itself didn't move — Section 2(13) is untouched, and so is CBIC's test for applying it. Most agencies that deliver work directly to a foreign client were never intermediaries under that test, and this reform changes nothing for them.

What Was Section 13(8)(b), and What Did It Cost You?

Every other exported service gets its place of supply fixed by where the recipient sits — that's Section 13(2), the default rule, and it's what makes export zero-rating possible at all. Intermediary services were the exception: place of supply was fixed at the supplier's location, India, no matter who paid or from where.

The practical effect: an agency correctly classified as an intermediary couldn't claim export status on that income. It didn't matter that the client was in London, the invoice was in USD, or the payment came in through a FIRA-backed wire. GST law treated the service as domestic, taxed at 18%.

Are You Actually an "Intermediary"? The Test That Decides Your GST Bill

CBIC Circular No. 159/15/2021-GST, dated 20 September 2021, sets the test. It lists five primary requirements, and they have to be satisfied collectively — miss one and you're not an intermediary, whatever your contract calls you.

• Minimum three parties. Two parties transacting the main supply, and a third — you — arranging it between them. A straightforward two-party engagement, where your agency contracts with a foreign client and delivers the service yourself, doesn't meet this bar.
• Two distinct supplies. There must be a main supply between the two principals, and a separate ancillary supply — the intermediary service itself. If there's only one supply in the picture and it's yours, the structure doesn't exist.
• The character of an agent or broker. You must be acting in a subsidiary, facilitating role — not performing the main supply. This is the qualitative test most contracts fail to reflect accurately.
• Not supplied on your own account. This is the line that separates most agencies from the definition. If you run the ad campaign, write the code, or produce the creative yourself, you're supplying that service on your own account, not standing between two other parties connecting them. The circular is explicit: if you provide the main service partially or fully yourself, you are not an intermediary.
• Sub-contracting is not intermediation. The circular states this as a separate clarification, not a condition to be tested. Hiring a freelance designer or a smaller studio to execute part of a project you've contracted to deliver doesn't make you an intermediary. You're the principal supplier to the client; your subcontractor is an independent supplier to you.

Agencies that do land inside the definition: running a vendor panel and taking a placement fee for connecting a foreign client to Indian providers you don't employ. Operating a marketplace model where revenue is a commission for arranging a deal between a foreign buyer and Indian sellers. Acting as a local representative who negotiates on behalf of a foreign principal without performing the work yourself.

The Nuance Nobody's Writing About

This is the actual point of this post, and it's the part most explainers skate past — "GST reform helps exporters" is a cleaner headline than "helps some exporters, changes nothing for most."

Scenario A — an agency that delivers. A 12-person performance marketing agency in Bangalore runs paid campaigns for a SaaS company in Berlin: plans the media buys, writes the copy, manages spend, reports directly to the client. No third party in the transaction — just the agency and the client. Under the CBIC test, this agency was providing the service on its own account. It was very likely never an intermediary, and was probably already eligible for export zero-rating under LUT before 30 March 2026. The omission of Section 13(8)(b) changes nothing here, because the clause was never taxing this agency in the first place.

Scenario B — an agency that arranges. A different agency in Mumbai keeps a bench of Indian video editors and animators, and its business is matching foreign production clients with the right freelancer per project, taking a coordination margin. The agency doesn't edit anything itself — it finds the editor, manages the handoff, invoices the client. Textbook intermediary structure: three parties, facilitation rather than direct performance. Before 30 March 2026, this agency owed 18% GST with no zero-rating available. After the omission, if its intermediary classification holds, the same revenue can become a zero-rated export.

Same reform, same date, opposite outcome — because the reform touches where intermediary services are taxed, not whether your agency is one.

What Changes in Your Actual Filing, Starting Now

If you've confirmed you're an intermediary and this applies to you, three things change in practice.

• LUT becomes your default path. Instead of charging IGST and claiming a refund later, file a Letter of Undertaking and invoice foreign clients without charging GST, provided payment arrives in convertible foreign exchange and the other Section 2(6) conditions are met.
• Self-invoicing under reverse charge, if you're the one engaging a foreign intermediary. This cuts the other way for some agencies: if you're the recipient of an intermediary service from a party outside India — a foreign agent, broker, or commission agent handling marketing, procurement, or deal facilitation — the place of supply for that inbound service has also shifted, and you may now need to self-assess and pay IGST under RCM at 18%. The self-invoice is issued under Section 31(3)(f) of the CGST Act, 2017. That means two invoices in the transaction: a commercial invoice from the foreign supplier, and your own self-invoice as the registered Indian recipient — and the self-invoice date is the reference point for both taxability and credit. ITC on RCM-paid GST is claimable if the input is used for taxable supplies. Check both directions before assuming this is a one-way win.
• ITC that was refund-only may now flow more directly, since LUT-based zero-rating skips the refund cycle entirely rather than working around it.

None of this is automatic — it depends on correctly re-establishing your classification and updating your invoicing setup with your GST practitioner.

Where GST Reform Stops and Your Real Problem Starts

Getting your GST classification right is one filing decision, made once and maintained. It's worth doing properly — but it's a small piece of what happens after a foreign payment lands. The FIRA still has to be generated and matched to the right invoice. The payment still has to reconcile against your ledger before you can trust your own revenue numbers. Your income tax position runs on a separate clock from your GST filing entirely, and nothing about Section 13(8)(b) touches it.

That's the layer Lumeo is built for — not GST classification specifically, but the full sequence a services-exporting business has to get right every time a payment lands, from FIRA to reconciliation to the tax filings downstream of it, so it isn't something you're reconstructing by hand every quarter with a CA who bills by the hour.