Raj Jaggi
Introduction: The Date That Decides the Export Character
The omission of the special place-of-supply provision for intermediary services under Section 13(8)(b) of the Integrated Goods and Services Tax (IGST) Act, 2017, effective 30.03.2026, has raised an important transitional question for exporters of services. If a commission service was provided to a foreign client before 30.03.2026, but the invoice was issued and payment was received after 30.03.2026, can the supplier claim that the transaction qualifies as an export of services under the amended law? This issue is particularly important for commission agents, marketing support entities, sourcing agents and business facilitators providing services to overseas companies, because their transactions often involve performance of service in one period and invoicing or receipt of commission in a later period.
Where the service was completed before 30.03.2026, the transaction should ordinarily not be treated as an export merely because the invoice was issued and payment was received after the amendment. The later invoice and the later receipt of foreign exchange may be relevant for compliance and documentation, but they cannot, by themselves, change the legal character of a service already supplied when intermediary services were governed by the then applicable statutory place-of-supply provision of Section 13(8)(b) under the IGST Act.
The Pre-Amendment Statutory Position on Intermediary Service
Before the amendment, intermediary services were governed by the special place-of-supply rule under Section 13(8)(b) of the IGST Act. For intermediary services, the place of supply was the location of the supplier of services. Accordingly, when an Indian commission agent arranged or facilitated a transaction for a foreign company, the place of supply was treated as India because the intermediary was located in India. Consequently, even if the recipient was outside India and payment was received in convertible foreign exchange, one essential condition for export of services failed, as the place of supply was not outside India.
This position created a special difficulty for commission-based service providers. In many cases, the economic recipient was located outside India, the consideration was received from abroad, and the service was commercially connected with foreign trade. Yet, because of the deeming fiction in Section 13(8)(b), the place of supply remained in India. Such services therefore remained taxable in India and could not qualify as zero-rated exports merely on account of a foreign recipient and receipt in foreign exchange. This was the legal position when the commission service in the present illustration was provided in February 2026. The amendment made by the Finance Act, 2026, effective from 30.03.2026, may improve the position for future supplies, but the question is whether it can alter the tax character of a service already completed before that date.
The Five Conditions of Export Under Section 2(6) Must Be Satisfied Together
Section 2(6) of the IGST Act defines “export of services” through five cumulative conditions. The first condition is that the supplier of the service must be located in India. In the present type of case, this condition is usually satisfied because the commission agent or service provider is located in India. However, this condition only identifies the Indian supplier; it does not, by itself, confer export status. A service supplied from India becomes an export only when all the remaining statutory conditions are also satisfied.
The second condition is that the recipient of the service must be located outside India. In the present illustration, the recipient is a USA company, and therefore this condition is also satisfied, provided the contractual recipient is, in fact, the foreign company and not its Indian establishment or another Indian entity. This requires examining the agreement, invoice, correspondence, and payment trail. The third condition is the most crucial in intermediary cases: the place of supply of the service must be outside India. Before 30. 03. 2026, intermediary services failed at this stage because Section 13(8)(b) treated the place of supply as the location of the supplier, namely India. After the amendment, such services may fall under the general provision in Section 13(2), where the place of supply is generally the location of the recipient. Therefore, the date on which the service is supplied becomes decisive.
The fourth condition is that payment for the service must be received by the supplier in convertible foreign exchange or in Indian rupees, wherever permitted by the Reserve Bank of India. In the present illustration, payment received on 28.04.2026 can satisfy this condition if properly supported by bank realisation documents. However, payment is only one condition and cannot cure a failure of the place-of-supply condition. The fifth cumulative condition is that the supplier and recipient must not be merely establishments of a distinct person, as per Explanation 1 to Section 8 of the IGST Act. This condition prevents transactions between two establishments of the same legal person from being treated as export. Thus, if the Indian supplier and the foreign recipient are truly independent persons, this condition is satisfied. But if the Indian entity is merely an establishment of the same foreign company, the export claim can fail even if payment is received from abroad.
Foreign Payment Is Important, but It Does Not Decide Export Status Alone
Receipt of foreign exchange is often treated in commercial discussions as the strongest indicator of export. Legally, however, it is only one of the five conditions under Section 2(6). A transaction may involve a foreign recipient and a foreign exchange payment, yet still fail to qualify as export if the place of supply is in India or if the supplier and recipient are establishments of the same person. This is why intermediary service disputes before 30.03.2026 often resulted in the denial of export benefit despite foreign currency receipts.
In the present illustration, the payment received on 28.04.2026 is favourable but not conclusive. If the service was fully performed in February 2026 and, on that date, the place of supply was India because of the intermediary rule, the later receipt of foreign exchange would not retrospectively convert the supply into export. The payment condition may be satisfied in April 2026, but the place-of-supply condition must be tested with reference to the law applicable to the supply. Therefore, the transaction cannot be analysed only from the date of payment; it must be analysed from the date when the service was provided, and the commission became due.
Time of Supply Cannot Rewrite the Nature of a Completed Supply
Section 13 of the CGST Act, 2017 deals with the time of supply of services. Broadly, where the invoice is issued within the prescribed period, the time of supply is the earlier of the date of invoice and the date of receipt of payment. Where the invoice is not issued within the prescribed period, the time of supply is the earlier of the date of provision of service and the date of receipt of payment. For services, the invoice is generally required to be issued within thirty days from the date of supply of service. This statutory scheme prevents a taxpayer from shifting the tax point merely by delaying the invoice beyond the prescribed period.
This provision is decisive in the present illustration. If the commission service was provided in February 2026 and the invoice was issued only on 02.04.2026, the invoice would be treated as falling outside the prescribed thirty-day period. In such a situation, the time of supply would not be determined solely by the invoice date. It would relate back to the earlier of the date of provision of service and the date of receipt of payment. Since payment was received on 28.04.2026, the earlier event would be the provision of service in February 2026. Therefore, if the service was completed in February 2026, the time of supply would ordinarily fall before 30.03.2026, and the pre-amendment intermediary rule may continue to govern the transaction.
Prospective Reform Cannot Normally Convert Past Supplies Into Exports
A statutory amendment is generally prospective unless the law expressly provides otherwise or the amendment's nature clearly indicates retrospective operation. The omission of the intermediary place-of-supply provision should therefore ordinarily apply to supplies made on or after 30.03.2026. It should not normally reopen or re-characterise services already completed before the amendment. This approach is consistent with basic tax certainty, as tax liability must be determined with reference to the law in force at the relevant point of supply.
If a service was provided in February 2026 and, under the law then applicable, the place of supply was India, the later omission of the intermediary rule should not automatically alter the tax consequence of that completed supply. However, commission arrangements require careful factual examination. Sometimes commission becomes due only when a post-amendment event occurs, such as acceptance of order, shipment of goods, realisation of sale proceeds, or completion of a contractual milestone. If the agreement clearly shows that the service or entitlement was continuing and crystallised only after 30.03.2026, there may be an arguable case for applying the amended law to that portion. But such a claim must be supported by agreement terms, correspondence, commission working, invoice narration, and accounting treatment.
Invoice Date and Payment Date Are Supporting Facts, Not Decisive Facts
The invoice dated 02.04.2026 and the payment received on 28.04.2026 are not irrelevant. They may be important for reporting, foreign exchange realisation, refund documentation, and reconciliation with returns. They may also support the taxpayer if the service is genuinely continuous or if the contractual right to commission arose only after 30.03.2026. However, where the service was actually performed and completed in February 2026, these later events should not be treated as decisive for export classification.
A distinction must be maintained between documentation of supply and the occurrence of supply. An invoice records or evidences a supply; it does not always create the supply. Payment discharges consideration; it does not always determine when the service was provided. Therefore, if the underlying service was completed in February 2026, a delayed invoice cannot, by itself, shift the service into the post-amendment period. If an export benefit is claimed solely on the basis of an invoice date after 30.03.2026, the Department shall examine whether the delay in invoicing was genuine or adopted to obtain the benefit of the amended place-of-supply provision.
Refund of IGST Paid on Export Faces a Foundational Hurdle
A refund claim for IGST paid on the export of services can succeed only if the underlying supply qualifies as zero-rated. Under Section 16(1)(a) of the IGST Act, the export of services is zero-rated. The refund then operates under Section 54 of the CGST Act and the relevant CGST Rules, 2017, subject to conditions and procedure. However, the foundation of the refund is that the transaction must first qualify as the export of services under Section 2(6). If the transaction fails any one of the five conditions, a refund as the export of services may not be sustainable.
Therefore, if the February 2026 commission service was an intermediary service under the pre-amendment law and its place of supply was India on the relevant date, it would not satisfy Section 2(6) of the IGST Act, 2017. In that case, IGST paid would not be refundable as “IGST paid on export of services” because the transaction itself would not constitute an export. The position may be different only if the taxpayer can factually segregate post-30.03.2026 supplies or establish that the commission entitlement crystallised after the amendment. In such cases, the taxpayer should maintain the agreement, date-wise service records, emails, commission computation, invoice narration, foreign inward remittance certificate, and reconciliation with returns.
Conclusion: Reform Helps Future Supplies, Not Completed Ones
The omission of Section 13(8)(b) gives prospective relief, but it does not ordinarily convert completed intermediary supplies into exports. In transitional cases, invoice and payment dates matter, but the decisive enquiry is when the service was supplied, when consideration became due and which statutory place-of-supply provision applied at that time
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