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What is the story about?
The Finance Bill 2026 has introduced a significant change in the way Goods and Services Tax (GST) applies to intermediary services provided by Indian brokers and financial intermediaries to Foreign Portfolio Investors (FPIs).
The Bill proposes to omit clause (b) of sub-section (8) of Section 13 of the Integrated Goods and Services Tax (IGST) Act, 2017, which earlier treated intermediary services supplied from India to foreign clients as having their “place of supply” in India.
Under the previous framework, this interpretation typically attracted 18% GST on services such as brokerage, commission agency and other intermediary activities, even when the recipient was located overseas.
With the deletion of this special provision through the Finance Bill, the place of supply will now be determined under the default rule in Section 13(2) of the IGST Act — that is, the location of the service recipient.
As a result, where the FPI is located outside India, the service would generally qualify as an export of service, making it zero-rated under GST, subject to prescribed conditions under the law.
Tax practitioners say the change aligns the treatment of intermediary services with broader export principles and could reduce compliance costs for Indian brokers dealing with offshore investors.
However, industry experts have also flagged the need for clarity on payment mechanisms.
ALSO READ | Budget 2026: Income tax filing deadline for small taxpayers extended to August 31
Suresh Swamy, Partner, Price Waterhouse & Co LLP, said that since FPIs typically route trades through Special Non-Resident Rupee (SNRR) accounts, explicit confirmation from authorities would be useful.
“Given that FPIs execute trade through their Special Non-Resident Rupee (SNRR) accounts, it is important to seek a clarification affirming that payments made via these accounts will meet the prescribed payment condition under the IGST Act for export of services. This clarification will ensure certainty and facilitate the seamless application of the amended place of supply rules to FPIs that are transacting through various currency accounts,” Swamy said.
Tax experts note that while the legislative amendment removes a long-standing hurdle for intermediaries serving overseas clients, practical implementation may depend on circulars or clarifications from the GST authorities on documentation and payment compliance.
The amendment forms part of the broader set of indirect tax changes carried through the Finance Bill 2026, which gives legal effect to proposals emerging from the Union Budget 2026–27.
ALSO READ | Budget 2026 tightens rules: One-day delay in tax audit report may cost ₹75,000
The Bill proposes to omit clause (b) of sub-section (8) of Section 13 of the Integrated Goods and Services Tax (IGST) Act, 2017, which earlier treated intermediary services supplied from India to foreign clients as having their “place of supply” in India.
Under the previous framework, this interpretation typically attracted 18% GST on services such as brokerage, commission agency and other intermediary activities, even when the recipient was located overseas.
With the deletion of this special provision through the Finance Bill, the place of supply will now be determined under the default rule in Section 13(2) of the IGST Act — that is, the location of the service recipient.
As a result, where the FPI is located outside India, the service would generally qualify as an export of service, making it zero-rated under GST, subject to prescribed conditions under the law.
Tax practitioners say the change aligns the treatment of intermediary services with broader export principles and could reduce compliance costs for Indian brokers dealing with offshore investors.
However, industry experts have also flagged the need for clarity on payment mechanisms.
ALSO READ | Budget 2026: Income tax filing deadline for small taxpayers extended to August 31
Suresh Swamy, Partner, Price Waterhouse & Co LLP, said that since FPIs typically route trades through Special Non-Resident Rupee (SNRR) accounts, explicit confirmation from authorities would be useful.
“Given that FPIs execute trade through their Special Non-Resident Rupee (SNRR) accounts, it is important to seek a clarification affirming that payments made via these accounts will meet the prescribed payment condition under the IGST Act for export of services. This clarification will ensure certainty and facilitate the seamless application of the amended place of supply rules to FPIs that are transacting through various currency accounts,” Swamy said.
Tax experts note that while the legislative amendment removes a long-standing hurdle for intermediaries serving overseas clients, practical implementation may depend on circulars or clarifications from the GST authorities on documentation and payment compliance.
The amendment forms part of the broader set of indirect tax changes carried through the Finance Bill 2026, which gives legal effect to proposals emerging from the Union Budget 2026–27.
ALSO READ | Budget 2026 tightens rules: One-day delay in tax audit report may cost ₹75,000
