Intermediary Services in GST: Definitions, Exclusions & Important Judgments

Intermediary services under India’s Goods and Services Tax regime have created uncertainty for service providers, students, and practitioners alike. Knowing when a transaction falls within the definition of intermediary services can determine whether the supply is taxed domestically or treated as a zero-rated export. This article explains everything you need to know in clear and simple terms.

Understanding the Statutory Definition

The IGST Act defines an intermediary as a broker, agent or any person who arranges or facilitates the supply of goods or services between two or more persons, but excludes anyone who supplies those goods or services on their own account. Three essential elements emerge:

1. Tripartite Arrangement: An intermediary must involve at least three parties: two principals engaged in the main supply and the intermediary who facilitates that supply. A transaction with only two parties cannot qualify.
2. Facilitation Role: The intermediary’s function is limited to arranging or facilitating the transaction. They do not provide the main service themselves.
3. Exclusion of Own-Account Supply: Anyone supplying the main service on their own account falls outside the definition of an intermediary. This exclusion is central to distinguishing a principal service provider from a facilitator.

Place of Supply and Tax Implications

Under Section 13(8)(b) of the IGST Act, the place of supply for intermediary services is the location of the supplier. For Indian suppliers, this means such services are treated as domestic supplies and attract CGST and SGST, even if the recipient is abroad and payment is in convertible foreign exchange. As a result:

• Input tax credit on inputs and input services used to provide these services cannot be refunded.
• Service providers face working capital blockages and additional compliance burdens.

To qualify as an export of services, five conditions must be met, including that the place of supply is outside India. The deeming fiction in Section 13(8)(b) directly conflicts with this condition and has triggered extensive litigation.

Regulatory Clarification by CBIC

In September 2021, the Central Board of Indirect Taxes and Customs issued Circular No. 159/15/2021-GST to clarify the concept. The circular reiterates the statutory definition and elaborates key requirements:

• Minimum Three Parties: There must be two principals and an intermediary.
• Two Distinct Supplies: The main supply is between principals and the ancillary facilitation supply by the intermediary.
• Agent or Broker Character: The intermediary must act in a subsidiary or supportive role.
• No Own-Account Supply: Persons supplying on their own account are excluded.
• Subcontracting Excluded: Subcontractors performing the main supply for a principal are treated as principal service providers, not intermediaries.

Despite these clarifications, disputes continued as administrative practice often lagged behind judicial thinking.

Important Rulings

Genpact India Pvt. Ltd v. Union of India (Punjab & Haryana High Court, November 18, 2022)

Genpact was held not to be an intermediary as it directly provided services to its overseas affiliate without third-party facilitation. The court allowed a Rs. 26.34 crore ITC refund, treating the supply as export of services.

Waters India Pvt. Ltd. v. Union of India (Karnataka High Court, 26 April 2025)

The court ruled Waters India is not an intermediary. Services to its Austrian affiliate were rendered independently, and show cause notices demanding GST were quashed. The supply qualified as export.

Material Recycling Association of India v. Union of India (Gujarat High Court, 24 July 2020)

Gujarat HC upheld Section 13(8)(b) of the IGST Act, ruling that intermediary services provided from India are not exports. Place of supply is deemed as the supplier's location, attracting CGST and SGST.

Dharmendra M. Jani v. Union of India (Bombay High Court, split verdict June 2021; third judge November 2023)

A split verdict on the constitutionality of Section 13(8)(b); the third judge upheld it but limited its effect to IGST. This created ambiguity, suggesting intermediary services may still qualify as exports under CGST and SGST, later clarified by the Supreme Court in SNQS.

Key CESTAT Rulings on Intermediary Services under GST

Recent decisions by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) have helped clarify when a service qualifies as “intermediary” under GST. Most rulings support the idea that if a company provides services directly on its own account, it is not an intermediary.

1. SNQS International Socks (Upheld by Supreme Court, July 2024)

CESTAT ruled that support services like vendor selection and quality checks were part of a direct contract, not intermediary services. The Supreme Court confirmed this view, strengthening the position of exporters.

2. THE PDQ ASIA v. NOIDA (May 2025)

Business support services were taxed as intermediary services due to a 2014 rule change. The company began paying tax from that point.

3. VCREATE LOGIC v. Bangalore West (March 2025)

A refund was denied on the claim that services were intermediary. The company argued that they provided export services directly and contested the classification.

4. Evonik Silica India v. Bharuch (February 2025)

The tax department said the services were intermediary, but the company claimed they were direct exports. The case focused on who the real service recipient was.

5. IDP Education India (October 2021)

Under the old tax law, CESTAT ruled that IDP was not an intermediary. Courts later agreed, citing the continued similarity between GST and earlier service tax rules.

Conclusion

The GST treatment of intermediary services remains unclear due to conflicting High Court rulings. Some courts allow export status for direct services, but others uphold domestic taxation under Section 13(8)(b). A final verdict from the Supreme Court is needed for clarity and uniformity.

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