Removal of intermediary clause brings GST relief for IT companies

In a major relief for India’s IT services exporters, the government has scrapped the contentious “intermediary” clause under the Integrated Goods and Services Tax (IGST) Act through the Finance Act, 2026 — a move expected to ease long-standing tax disputes and unlock refunds.

The amendment addresses a key pain point for IT/ITES firms, global capability centres (GCCs), and other cross-border service providers catering to overseas clients. Until now, services classified as intermediary were taxed based on the supplier’s location in India, even if the end client was abroad. As a result, such services failed to qualify as exports, leading to denial of zero-rating benefits and blocking of GST refunds.