Place of Supply Rules for Services: The Provision That Decides IGST or CGST and SGST

The pattern is worth noticing: for many categories the answer turns on whether the recipient is registered. For a business with a mixed customer base, that means the same service can have two different places of supply depending on the customer, and the billing system has to be able to make that distinction.

Section 13: one party outside India

The general rule in section 13(2) is the location of the recipient. Where the location of the recipient is not available in the ordinary course of business, it is the location of the supplier.

Specific rules displace it, including for:

• services in respect of goods required to be made physically available by the recipient to the supplier — the location where the services are actually performed;
• services requiring the physical presence of the recipient — where performed;
• services directly in relation to immovable property — the location of the property;
• admission to or organisation of an event — where the event is actually held;
• transportation of goods other than by mail or courier — the destination of the goods;
• passenger transportation — where the passenger embarks;
• services on board a conveyance — the first scheduled point of departure;
• online information and database access or retrieval services — the location of the recipient.

A further group — services supplied by a banking company to account holders, intermediary services, and hiring of means of transport for up to one month — historically took the location of the supplier as the place of supply. That group is where the 2026 change lands.

The intermediary change of 2026

For years, section 13(8)(b) deemed the place of supply of intermediary services to be the location of the supplier.

The effect was that an Indian company brokering, facilitating or arranging a supply between two overseas parties — earning in foreign currency, serving a foreign client — had a place of supply in India. The service therefore failed the export test, was not zero-rated, and attracted GST. The provision was litigated extensively, including a constitutional challenge that produced a split verdict in the Bombay High Court, and it sat awkwardly with the destination-based logic of the tax.

The 56th GST Council recommended in September 2025 that the clause be omitted. The Finance Act, 2026 omitted section 13(8)(b), with effect from 30 March 2026, the date of Presidential assent.

The consequence is that intermediary services now fall under the general rule in section 13(2) — the place of supply is the location of the recipient.

The definition of “intermediary” in section 2(13) was retained. So the classification question — whether a person is acting as an intermediary or supplying a service on their own account — has not disappeared. What has changed is the consequence of the answer.

What the change means in practice

For Indian exporters of intermediary services. Where the recipient is outside India, the place of supply is now outside India. Subject to the other conditions of the export definition being satisfied, the supply can qualify as an export of services, with zero-rating and the ability to claim refund of unutilised input tax credit. This is a material change for brokerage, agency, marketing-support and facilitation businesses serving overseas clients — and it converts an embedded cost into a recoverable one. Our note on the GST refund process covers how such claims are made.

For Indian recipients of intermediary services from abroad. The mirror image applies. Where a foreign intermediary supplies services to an Indian recipient, the place of supply is now the location of the recipient — in India. That makes it an import of services, with the Indian recipient liable under reverse charge, required to self-assess and pay IGST, and to issue the documentation that reverse charge requires.

Businesses have tended to focus on the first consequence and overlook the second. A company that engaged overseas agents or brokers and treated the arrangement as outside GST should re-examine the position from the effective date.

On timing. The change operates from 30 March 2026. Supplies before that date continue to be governed by the provision as it stood, and open periods are assessed on the old law. A single financial year can therefore contain both positions, and the cut-off should be applied by reference to the time of supply rather than the invoice date alone.

When you get it wrong

Paying the wrong tax is not the same as not paying tax, and the law provides a specific mechanism.

Where a supplier has paid central and State tax on a transaction subsequently held to be an inter-State supply, or has paid integrated tax on one subsequently held to be intra-State, section 77 of the CGST Act and section 19 of the IGST Act provide for refund of the tax wrongly paid, and provide that no interest is payable on the correct tax for the period concerned.

Three practical points. The refund is applied for, not automatic. The correct tax must be paid — the mechanism relieves interest, not liability. And “subsequently held” has been the subject of clarification, because taxpayers who identified their own error wanted the benefit without waiting for an officer to hold anything.

Where the error goes the other way — treating a domestic supply as an export — the consequence is a demand for the tax not paid, with interest and potentially penalty, and the refund already claimed on inputs comes under scrutiny. That asymmetry is why export classification deserves to be documented rather than assumed, and it is a recurring subject of tax litigation.

Where errors cluster

Recipient address not captured for unregistered customers, defaulting the place of supply to the supplier’s location.

The GSTIN on the invoice not matching the place of supply stated. The two have to be consistent, and the invoice is where the position is declared — see our note on tax invoice rules.

Applying section 12 rules to a section 13 transaction, or the reverse, where one party is outside India.

Assuming that work performed in India means a place of supply in India. For most services under section 13 the general rule is the location of the recipient, not where the work was done.

Treating a branch or project office of a foreign company as a foreign recipient. An establishment in India is a distinct person, and supplies to it are domestic supplies.

Not revisiting intermediary arrangements after 30 March 2026, in both directions.

The wider framework these sit within is covered in our general guide to GST for businesses, and the ongoing obligations in our note on GST compliance.