GST on Cross-Border Services: Place of Supply Rules Every Exporter Should Know

Direct answer: For a service supplied to a foreign client, the place of supply is determined under Section 13 of the IGST Act, 2017. The default rule in Section 13(2) fixes the place of supply at the location of the recipient, which means the supply is outside India and can qualify as a zero-rated export. That default is displaced by the exceptions in Sections 13(3) to 13(13), which anchor the place of supply to where the service is performed, where the property is situated, or where the event is held. If any one exception applies and places the supply in India, the transaction is not an export, and IGST at the applicable rate becomes payable notwithstanding that the client is overseas and pays in foreign currency.

Indian service exporters routinely assume that a foreign client plus a foreign currency remittance equals an export. It does not. Those are two of the five conditions in Section 2(6) of the IGST Act, and the condition that most often fails on scrutiny is the third one, place of supply. This article sets out how the place of supply is determined for cross-border services, what changed in 2026, and the compliance chain that has to hold together for a refund claim to survive.

1. Why place of supply, and not the client’s address, decides the outcome

GST is a destination-based tax. Where consumption is treated as occurring determines which jurisdiction taxes the supply, and Section 13 of the IGST Act is the statutory device that answers that question whenever either the supplier or the recipient is outside India.

The commercial consequence is binary. If the place of supply is outside India and the other conditions are met, the supply is an export of services, zero-rated under Section 16 of the IGST Act, and the exporter may either supply under a Letter of Undertaking without payment of tax and claim a refund of accumulated input tax credit, or pay IGST and claim a refund of the tax paid. If the place of supply is in India, the same invoice becomes a taxable domestic supply. Because the foreign client will not accept a GST charge and cannot claim credit for it, the tax is invariably borne by the Indian supplier out of its own margin, with interest and penalty if the position is corrected only at assessment stage.

2. The five conditions of Section 2(6): all must be satisfied together

Section 2(6) of the IGST Act defines export of services. The conditions are cumulative, not alternative. Failure of any single limb takes the supply out of zero-rating entirely.

1. 2.1 The supplier of the service is located in India.
2. 2.2 The recipient of the service is located outside India.
3. 2.3 The place of supply of the service is outside India.
4. 2.4 The payment has been received by the supplier in convertible foreign exchange, or in Indian rupees wherever permitted by the Reserve Bank of India.
5. 2.5 The supplier and the recipient are not merely establishments of a distinct person in accordance with Explanation 1 to Section 8 of the IGST Act.

2.6 The distinct-person condition in practice

Condition 2.5 catches the Indian branch or project office of a foreign entity billing its own head office. It does not catch a separate legal entity. Circular No. 161/17/2021-GST dated 20 September 2021 clarified that an Indian company and its foreign holding or subsidiary company are separate persons under the CGST Act, and are therefore not merely establishments of a distinct person. Services rendered by an Indian subsidiary to its overseas parent can accordingly qualify as export of services, provided the remaining conditions are met. The distinction is between a branch of the same legal person and a related but separately incorporated entity.

2.7 A note on registration

It is frequently asserted that every service exporter must register under GST irrespective of turnover. That is not correct as a general proposition. Notification No. 10/2017-Integrated Tax exempts persons making inter-State supplies of taxable services from compulsory registration where aggregate turnover computed on an all-India basis does not exceed Rs. 20 lakh, or Rs. 10 lakh in the case of special category States. The notification has since been amended, and the current threshold should be confirmed against the notification as it stands. An exporter below the threshold may nevertheless choose to register voluntarily, and in practice most do, because registration is a precondition for filing a Letter of Undertaking and for claiming refund of input tax credit.

3. Section 13: the default rule and the exceptions that displace it

3.1 The default rule

Section 13(2) provides that the place of supply of services, other than those specified in sub-sections (3) to (13), is the location of the recipient of services. Where the recipient’s location is not available in the ordinary course of business, the place of supply is the location of the supplier.

The proviso matters more than it appears to. An exporter whose records do not evidence the recipient’s overseas location, because the engagement rests on informal email instructions with no contract, no address on the invoice and no correspondence establishing where the client sits, invites the department to apply the proviso and place the supply at the supplier’s location in India. Documentation of the recipient’s location is not a formality; it is the operative fact on which the default rule turns.

3.2 The exceptions

Provision	Category of service	Place of supply
13(3)(a)	Services requiring the physical presence of goods made available by the recipient	Where the services are actually performed
13(3)(b)	Services requiring the physical presence of the individual recipient	Where the services are actually performed
13(4)	Services directly in relation to immovable property, including architects, interior decorators, surveyors, hotel accommodation and grant of rights to use property	Where the immovable property is located or intended to be located
13(5)	Admission to, or organisation of, an event, and services ancillary thereto	Where the event is actually held
13(6) and 13(7)	Services under 13(3) to 13(5) supplied at more than one location, including a location in India	India, with proportionate apportionment across States where applicable
13(8)(a)	Banking and financial services, including stockbroking, supplied to account holders	Location of the supplier
13(8)(c)	Hiring of means of transport, including yachts but excluding aircraft and vessels, up to one month	Location of the supplier
13(10)	Passenger transportation	Where the passenger embarks for the continuous journey
13(11)	Services on board a conveyance	First scheduled point of departure of that conveyance
13(12)	Online information and database access or retrieval services	Location of the recipient

Section 13(3)(a) is the exception most often missed by exporters of testing, repair, calibration and certification services. Where a foreign customer ships equipment to India for testing and the results are reported abroad, the goods have been made available by the recipient and the service is performed in India. The place of supply is India and the supply is not an export, notwithstanding foreign currency receipt. There is a carve-out in the second proviso to Section 13(3)(a), inserted with effect from 1 February 2019, for services supplied in respect of goods temporarily imported into India for repairs or for any other treatment or process and exported after such repairs, treatment or process without being put to any use in India other than that required for the repairs, treatment or process. Where the carve-out applies, the place of supply reverts to the default rule in Section 13(2), and that carve-out is the pivot on which most such assessments turn.

4. The 2026 intermediary reset

The single most consequential change for service exporters in recent years is the omission of Section 13(8)(b) of the IGST Act.

4.1 The position until 29 March 2026

Section 13(8)(b) deemed the place of supply of intermediary services to be the location of the supplier. An Indian agent, broker or facilitator arranging a supply between two other persons therefore had a place of supply in India regardless of where its principal was located. The third condition of Section 2(6) failed, export status was denied, and IGST at 18 per cent applied to commission earned in foreign exchange. The provision was challenged repeatedly across High Courts with conflicting outcomes and no settled ratio.

4.2 The amendment

Acting on the recommendation of the GST Council, Parliament omitted clause (b) of Section 13(8) by Section 157 of the Finance Act, 2026 (No. 4 of 2026), which received Presidential assent on 30 March 2026. The operative text is short: in Section 13 of the IGST Act, in sub-section (8), clause (b) shall be omitted.

On commencement, Section 1(2) of the Finance Act, 2026 appoints 1 April 2026 for sections 2 to 129, clause (b) of section 152 and section 156, and leaves sections 153 to 155 to come into force on a date to be notified. Section 157 falls outside both limbs. Since the Act does not express it to come into operation on any particular day, it took effect on the date of assent by operation of Section 5 of the General Clauses Act, 1897. The omission is accordingly effective from 30 March 2026 and operates prospectively.

4.3 What follows

With clause (b) gone, intermediary services fall back to the default rule in Section 13(2). Where the principal is located outside India, the place of supply is outside India, and the commission can qualify as an export of services subject to the remaining conditions of Section 2(6) being satisfied. Indian agents, brokers, marketing representatives and procurement facilitators serving overseas principals are, from that date, able to supply under a Letter of Undertaking and claim refund of accumulated input tax credit.

The reciprocal effect is often overlooked. Where an Indian business engages a foreign agent or commission agent, the place of supply now shifts to India under the same default rule. The transaction becomes an import of service, and the Indian recipient must discharge IGST under reverse charge and issue a self-invoice under Section 31(3)(f) of the CGST Act. Input tax credit of the tax so paid is available where the service is used for making taxable supplies. Businesses paying overseas commission should reassess their reverse-charge position and cash-flow impact from 30 March 2026 onwards.

Practice point: the amendment is prospective. Positions taken for periods up to 29 March 2026, including pending litigation and refund claims, continue to be governed by Section 13(8)(b) as it then stood.

5. Two repealed provisions that still appear in circulation

5.1 Section 13(9), transportation of goods

Section 13(9) formerly fixed the place of supply of services of transportation of goods, other than by mail or courier, at the place of destination of the goods. It was omitted by Section 162 of the Finance Act, 2023 with effect from 1 October 2023. Circular No. 203/15/2023-GST dated 27 October 2023 clarified that the place of supply for such services, where either the supplier or the recipient is outside India, is now determined under the default rule in Section 13(2), and not as a performance-based service under Section 13(3). A significant volume of online commentary still cites Section 13(9) as live law.

5.2 The proviso to Section 12(8)

The proviso to Section 12(8), which fixed the place of supply at the destination of the goods where transportation was to a place outside India, was omitted by Section 161 of the Finance Act, 2023. This governs the position where both the supplier and the recipient are in India, and is therefore relevant to exporters engaging Indian freight forwarders. It is a Section 12 provision, not Section 13, and should not be conflated with the point at 5.1.

6. Worked examples

Facts	Governing provision	Place of supply	Treatment
Indian company develops software for a US client, delivered remotely, paid in USD	13(2)	United States	Export, zero-rated
Indian firm provides management consultancy to a Singapore parent, both separately incorporated	13(2), read with Circular 161/17/2021	Singapore	Export, zero-rated
Indian laboratory tests machinery shipped to India by a German customer and reports results abroad	13(3)(a)	India	Not an export; IGST payable, subject to the temporary-import carve-out
Indian architect designs a commercial building situated in Mumbai for an overseas developer	13(4)	India	Not an export; CGST and SGST or IGST as applicable
Indian agency organises a conference held in Dubai for a UAE client	13(5)	United Arab Emirates	Export, zero-rated
Indian agent earns commission from a UK principal for facilitating sales, invoice dated after 30 March 2026	13(2), Section 13(8)(b) having been omitted	United Kingdom	Export, zero-rated
Indian company pays commission to a Dubai-based sales agent, invoice dated after 30 March 2026	13(2)	India	Import of service; IGST under reverse charge with self-invoice
Indian trainer conducts an in-person workshop in Bengaluru for employees of a foreign company	13(3)(b)	India	Not an export

7. The compliance chain

Establishing that a supply is an export is the first step. Converting that status into a realised refund requires the following to hold together.

1. 7.1 Letter of Undertaking. Filed in Form GST RFD-11 under Rule 96A of the CGST Rules. Circular No. 8/8/2017-GST dated 4 October 2017 provides that an LUT is valid for the whole financial year in which it is tendered, so a fresh LUT is required each year. An export invoice raised before the LUT for that year is on record cannot be supported by it, so the renewal should be completed in the last week of March.
2. 7.2 Choice of route. Either supply under LUT without payment of tax and claim refund of unutilised input tax credit, or pay IGST and claim refund of the tax paid. The first route preserves working capital; the second is simpler where input credit is negligible.
3. 7.3 Invoicing. The invoice should carry the LUT declaration, the recipient’s overseas address, the currency and value in foreign exchange, and the rupee equivalent at the applicable exchange rate.
4. 7.4 Returns. Report the export in Table 6A of GSTR-1 and as a zero-rated supply in Table 3.1(b) of GSTR-3B. The two must reconcile; mismatches are a leading cause of refund delay.
5. 7.5 Realisation. Two distinct time limits apply. Section 2(6)(iv) requires receipt in convertible foreign exchange, or in Indian rupees where permitted by the Reserve Bank of India. Separately, Rule 96A(1)(b) requires an exporter supplying under LUT to receive payment within one year from the date of the export invoice, or such further period as the Commissioner may allow; failing that, IGST with interest under Section 50 becomes payable within fifteen days of the expiry of that period.
6. 7.6 Evidence. Retain the Foreign Inward Remittance Certificate or Bank Realisation Certificate, the contract or engagement letter, and correspondence establishing the recipient’s location abroad.
7. 7.7 Refund application. Filed in Form GST RFD-01 under Section 54 of the CGST Act. Section 54(1) requires the application to be made before the expiry of two years from the relevant date.

8. Errors that recur in departmental scrutiny

1. 8.1 Treating foreign currency receipt as conclusive of export status, without testing place of supply.
2. 8.2 Overlooking Section 13(3)(a) in testing, repair, calibration and certification engagements.
3. 8.3 Overlooking Section 13(4) where the underlying immovable property is in India, however remote the delivery.
4. 8.4 Raising export invoices before the LUT for the relevant financial year has been filed.
5. 8.5 Applying the 2026 intermediary amendment retrospectively to periods before 30 March 2026.
6. 8.6 Failing to identify the reverse-charge liability that now arises on commission paid to foreign agents.
7. 8.7 Assuming that a service to a foreign group entity fails the distinct-person test where the two are separately incorporated.
8. 8.8 Mismatch between Table 6A of GSTR-1 and Table 3.1(b) of GSTR-3B.
9. 8.9 Inadequate documentation of the recipient’s location, exposing the exporter to the proviso to Section 13(2).
10. 8.10 Relying on commentary that still treats Section 13(9) as operative.

9. Frequently asked questions

9.1 Is a service to a foreign client always an export under GST?

No. All five conditions in Section 2(6) of the IGST Act must be satisfied together. The condition that most often fails is that the place of supply must be outside India, which is determined under Section 13 and can fall in India even where the client is overseas.

9.2 Do I need GST registration if I only export services?

Registration is not compulsory merely because you export. Notification No. 10/2017-Integrated Tax exempts inter-State suppliers of services from compulsory registration below the aggregate turnover threshold. Registration is, however, a precondition for filing a Letter of Undertaking and for claiming refund of input tax credit, so most exporters register voluntarily.

9.3 Can an Indian subsidiary export services to its foreign parent?

Yes, provided the two are separate legal entities. Circular No. 161/17/2021-GST clarified that a company incorporated in India and its foreign holding or subsidiary company are separate persons, and are therefore not merely establishments of a distinct person under Explanation 1 to Section 8. The position differs for a branch or project office of the same legal entity.

9.4 What changed for intermediary services in 2026?

Section 13(8)(b), which fixed the place of supply of intermediary services at the supplier’s location, was omitted by Section 157 of the Finance Act, 2026. Section 1(2) of that Act does not appoint a commencement date for section 157, so it took effect on assent, 30 March 2026, under Section 5 of the General Clauses Act, 1897. Intermediary services now follow the default rule in Section 13(2), so commission earned from an overseas principal can qualify as an export.

9.5 Does the intermediary amendment apply to earlier periods?

It operates prospectively. Supplies made up to 29 March 2026 continue to be governed by Section 13(8)(b) as it then stood, and existing disputes for those periods are unaffected by the omission.

9.6 What is the GST position on commission paid to a foreign agent?

Following the omission of Section 13(8)(b), the place of supply is the location of the Indian recipient. The transaction is an import of service, and the Indian recipient must pay IGST under reverse charge and issue a self-invoice under Section 31(3)(f) of the CGST Act. Input tax credit is available where the service is used for taxable supplies.

9.7 Where is the place of supply for architectural services on Indian property?

India, under Section 13(4), because the service is directly in relation to immovable property. This holds even where the client is overseas and pays in foreign currency, and the supply is accordingly not an export.

9.8 Is software exported to a US client zero-rated?

Ordinarily yes. No exception in Sections 13(3) to 13(13) applies to remote software development, so the default rule in Section 13(2) places the supply at the recipient’s location. Subject to the remaining conditions of Section 2(6), it is a zero-rated export.

9.9 What happens if I raise an export invoice before filing the LUT?

That invoice cannot be supported by the LUT for the year, and the supply must be made on payment of IGST with a subsequent refund claim. The LUT should therefore be renewed before the financial year begins.

9.10 Is Section 13(9) still relevant to transportation of goods?

No. It was omitted with effect from 1 October 2023. Circular No. 203/15/2023-GST confirmed that the place of supply for transportation of goods, where either party is outside India, is now determined under the default rule in Section 13(2).

10. Closing observation

Place of supply is a question of statutory classification, and it is settled at the point the engagement is structured rather than at the point the refund is claimed. Contracts, delivery mechanics and invoicing that are aligned with Section 13 from the outset are considerably cheaper than the alternative, which is reconstructing the position under a show cause notice several years later. Where an engagement involves goods physically present in India, work performed on site, property situated in India, or an agency arrangement, the classification merits a considered view before the first invoice is raised.

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Discuss your position with us. We offer a no-charge 30-minute consultation to review the place of supply classification for your cross-border service contracts and the supporting compliance chain.

Marcken Consulting LLP — IBBI-Registered Valuer (Securities or Financial Assets)
Website: marckenconsulting.com
Phone: +91 99980 59923 / +91 99985 39902
Email: crm@marckenconsulting.com

This article states the position under the IGST Act, 2017 as amended up to the Finance Act, 2026, and is general commentary rather than advice on any specific transaction. Place of supply determinations are fact-sensitive and should be confirmed against the bare provisions and current notifications before being acted upon.