Understanding when a service qualifies as export and when GST applies.

Intermediary services are one of the most debated areas under GST, especially for Indian freelancers, consultants and agencies serving foreign clients. Many service providers assume that any payment received from outside India automatically counts as an export and qualifies for zero rating. Under GST law, this is not true. Intermediary services are treated differently from other service exports, and misclassification can lead to GST demands, blocked refunds and compliance disputes.

To classify a service correctly, you need to understand the GST definition of an intermediary, the conditions for export of services and the exceptions that determine whether zero rating applies.

What GST Considers an Intermediary Service

GST defines an intermediary as a person who arranges or facilitates the supply of goods or services between two or more parties. The intermediary does not supply the goods or services on their own account. Instead, they act as a link between the supplier and the final customer.

Typical examples include:

• Commission agents
• Brokers
• Business matchmakers
• Sales facilitators
• Agents who arrange service delivery but do not execute it themselves

If you connect two parties and get paid for bringing them together, GST may classify you as an intermediary.

Why Intermediary Classification Matters for GST Export Benefits

Export of services under GST is zero rated only if all five export conditions are met. One of those conditions is that the place of supply must be outside India.

For intermediary services, the place of supply is fixed under GST law. It is always the location of the supplier of the intermediary service. If the supplier is in India, the place of supply is India.

This rule prevents intermediary services from qualifying as exports, even if the recipient and end customer are outside India and payment is received in foreign currency.

As a result:

• Most intermediary services cannot claim zero rating.
• GST must be charged on invoices issued to foreign clients.
• Input tax credit can still be claimed, but output GST becomes payable.

Understanding this rule is essential for staying compliant.

When a Service Is Not Considered Intermediary

Many service providers mistakenly think they fall under the intermediary category when they do not. A service is not intermediary if:

• You deliver the service on your own account.
• You are responsible for the output and outcome of the service.
• You are not merely connecting two parties.
• You do not earn a commission linked to the main transaction.

For example, a marketing agency running ad campaigns for an overseas brand is not an intermediary. They deliver the marketing service themselves and are not facilitating someone else’s service.

Similarly, software developers, designers, consultants and IT service providers typically deliver the service directly, so their supplies qualify as exports when all other export conditions are met.

Key Tests to Determine Intermediary Status

To classify services correctly, use these practical checks:

Test Number	Question to Ask	Indication of Intermediary Status
Test 1	Are you delivering the service or only facilitating it?	If you only facilitate, you are likely an intermediary.
Test 2	Are you paid commission or consideration for brokering?	Commission-based payments often indicate intermediary status.
Test 3	Does your client instruct you to arrange or find another supplier?	If your role is to identify, connect or negotiate deals between other parties, you may be an intermediary.
Test 4	Is the service flow between two independent parties?	If your role is to bring them together, you facilitate. If you create the output, you deliver.

These tests help classify the service accurately.

When Intermediary Services Cannot Be Zero Rated

Under Section 13 of the IGST Act, the place of supply for intermediary services is always the location of the service provider. If you are in India, the place of supply is India.

This removes the possibility of treating the supply as an export. You must charge IGST on your invoice even if:

• Your client is abroad
• You receive foreign currency
• The work benefits a foreign entity

Many Indian consultants and agents face reassessment because they treated their services as export when they actually qualify as intermediary.

When a Service Qualifies as Export Despite Connecting Parties

There are some exceptions. A service that involves connecting parties may still avoid intermediary classification if:

• The supplier performs substantive work rather than only coordination.
• The supplier takes responsibility for delivery.
• The payment structure resembles a service fee, not a commission.
• The supplier provides bundled services rather than pure facilitation.

For example, a SaaS company that onboards users for an international partner but provides technical support, analytics or integration may still be a direct service provider, not an intermediary. The key is whether you are supplying on your own account.

Documentation That Supports Correct Classification

Exporters should maintain:

• Clear contracts describing responsibility for deliverables
• Invoices that explain the nature of service provided
• Evidence that payment is for your own service and not for facilitating another supplier
• Foreign inward remittance documentation such as bank advice or FIRA

These documents prove that the service is not intermediary and qualifies for zero rating.

Practical Mistakes Businesses Commonly Make

• Treating brokerage or commission income from international companies as exports.
• Assuming foreign currency receipt alone makes a supply export.
• Providing coordination services without real deliverables and classifying it as consulting.
• Using vague invoice descriptions that lead to incorrect evaluations.

Correct classification saves significant time during audits and refund claims.

How India Focused Export Platforms Support Compliance

Platforms designed for service exporters do not determine GST classification directly, but the clarity of documentation they provide makes compliance easier. Clean inward remittance records, purpose code mapping and invoice wise reconciliation help demonstrate that the service qualifies as export.

A platform like BRISKPE, which issues inward remittance documentation aligned with FEMA requirements, supports service exporters during GST refund claims and classification reviews by ensuring a clean audit trail.

Final Thoughts

Classifying intermediary services correctly is crucial for Indian businesses working with global clients. GST zero rating applies only when the place of supply lies outside India, which is not the case for most intermediary services. Misclassification leads to penalties, delayed refunds and compliance issues.

Understanding the difference between facilitation and direct service delivery helps businesses apply the correct GST treatment, avoid disputes and maintain clean export records.