You Charged 18% GST on Commission From a Foreign Client

There is a specific kind of Indian freelancer who has been quietly paying tax nobody else pays.

You aren't billing a US company for design work or code. You're billing them for bringing them business. A referral fee for sending a client their way. Affiliate commission on signups you drove. A retainer for handling sales conversations with Indian buyers on behalf of a foreign brand. A placement fee for a candidate you sourced for an overseas startup.

Your friend who writes React for the same US company invoices $3,000, charges zero GST, marks it "export of services under LUT," and moves on. You invoice $3,000 of commission and — if you had a careful CA — you charged 18% on top, or ate 18% out of it. No export benefit. No refund. Just a tax on money that came from outside India, for work consumed outside India.

That was Section 13(8)(b) of the IGST Act. It no longer exists.

What actually changed

The 56th GST Council meeting on 3 September 2025 recommended omitting clause (b) of Section 13(8) of the IGST Act. The Finance Bill 2026 carried it, and Section 157 of the Finance Act 2026 — which received Presidential assent on 30 March 2026 — deleted the clause.

The old provision was short and expensive:

The place of supply of the following services shall be the location of the supplier of services, namely: … (b) intermediary services

Read that again. If you were classified as an intermediary, GST law deemed the service to be supplied where you sit — in India — no matter where your client was, no matter that the money arrived in dollars. Place of supply in India means condition (c) of the export definition fails. Fail one condition and it isn't an export. Not an export means no zero-rating, no LUT benefit, no refund. 18%, full stop.

With clause (b) gone, intermediary services fall back to the default rule in Section 13(2) — place of supply is the location of the recipient. Your client is in Delaware. Place of supply is Delaware. The supply now walks and talks like every other service export.

On the effective date — read this carefully

Section 1(2) of the Finance Act 2026 lists which provisions commence on 1 April 2026 and which await a government notification. Section 157 appears in neither list. The mainstream professional view — Grant Thornton, several Big-4-adjacent firms, and most of the CA commentary published in April 2026 — is therefore that the omission takes effect from the date of assent, 30 March 2026.

A minority view says to wait for an explicit CBIC notification before changing invoicing practice. It is a conservative position and not an unreasonable one.

Confirm the date with your own CA before you re-issue anything. The direction of travel is not in dispute; the precise switch-on date is the one thing worth a ten-minute phone call.

First question: are you actually an intermediary?

Most freelancers who read about this immediately assume it applies to them. For the large majority, it never did — and that matters, because if you were never an intermediary, your exports were always zero-rated and nothing changes for you today.

The definition sits in Section 2(13) of the IGST Act: a broker, agent, or any other person who arranges or facilitates a supply between two or more persons — but does not include a person who supplies those goods or services on his own account.

Circular No. 159/15/2021-GST (20 September 2021) lays out the tests, and it remains in force — the amendment changed the place-of-supply rule, not the definition. The tests:

1. 1.At least three parties. Two principals doing the main deal, plus you facilitating it. A straight two-party engagement — you and your client — can never be intermediary service.
2. 2.Two distinct supplies. A "main supply" between the two principals, and a separate "ancillary supply" — your facilitation — that is clearly identifiable and distinct from it.
3. 3.The character of an agent or broker. The definition is exhaustive, not illustrative. You have to actually be arranging someone else's transaction.
4. 4.Not on your own account. If you're supplying the service yourself, you're a principal, not an intermediary.
5. 5.Sub-contracting is explicitly excluded. The circular is clear: where a main supplier outsources part or all of a service to you, you are making an independent supply to them — not facilitating theirs.

Here's how that lands in practice:

That last row is where trouble lives. If one agreement covers both delivery work and facilitation, the classification is fact-specific and your contract language does the heavy lifting. Words like arrange, facilitate, procure, on behalf of and introduce pull toward intermediary. Deliver, develop, provide, supply to you pull away from it.

What your invoice looked like — and what it should look like now

Before (commission billed to a foreign principal, treated as intermediary):

Invoice INV-2025-14
To: Northbeam Labs Inc., Delaware, USA

Referral commission, Q3                     USD 2,000.00
Place of supply: Gujarat (24)
IGST @ 18%                                  USD   360.00
Total                                       USD 2,360.00

Domestic supply. Reported in the regular B2C/B2B tables of GSTR-1. Real 18% cost, absorbed by you or argued over with a confused client.

After (assuming all export conditions are met):

Invoice INV-2026-31
To: Northbeam Labs Inc., Delaware, USA

Referral commission, Q2                     USD 2,000.00
SAC 998599 · Place of supply: Outside India (96)
GST: NIL — Export of service
"Supply meant for export of services under LUT
 without payment of integrated tax"
Total                                       USD 2,000.00

Zero-rated. Reported in GSTR-1 Table 6A. Same money in, 18% less friction.

The change fixes one condition. The other four still apply.

This is the part the celebratory posts skip. Omitting 13(8)(b) removed one obstacle. Export of services under Section 2(6) of the IGST Act still requires all five conditions:

1. 1.The supplier is located in India — you are.
2. 2.The recipient is located outside India — check that you're billing the foreign entity, not its Indian subsidiary or Indian office.
3. 3.The place of supply is outside India — this is the condition the amendment fixed.
4. 4.Payment is received in convertible foreign exchange (or INR where RBI permits) — a rupee credit from an Indian arm breaks this.
5. 5.Supplier and recipient are not merely establishments of the same person.

Miss any one and it's a domestic supply again, amendment or no amendment. We covered these conditions and the paperwork behind them in our guide to invoicing foreign clients in USD.

You need an LUT — and you may never have filed one

If your entire foreign income was intermediary commission, you had no reason to file a Letter of Undertaking. You had no exports to shelter.

That changed. The LUT must be on file before you raise your first zero-rated invoice, not after. It's Form GST RFD-11 on the portal, it's free, it takes about fifteen minutes, and it's valid for one financial year — so an LUT for FY 2026-27 is what you need now. Full walkthrough here: how to file an LUT using Form GST RFD-11.

Without an LUT, you can still export — but you must pay IGST upfront and claim it back as a refund. For a solo freelancer that's a working-capital problem with no upside.

What about the invoices you already raised?

Short version: the omission is prospective.

There is no saving clause and no retrospective effect. Commission invoices raised before the effective date remain governed by the old law. Assessments, demands and notices already in flight are not automatically resolved by the amendment.

Some taxpayers are trying to read retrospective relief into the Supreme Court's decision in Union of India v. K.C. Overseas Education (P) Ltd. — a case where the service was rendered on a principal-to-principal basis, not as an intermediary at all. The professional consensus is that this argument is unlikely to succeed on its own, and industry bodies are still pressing for explicit retrospective relief that has not been granted.

If you have an open notice, a pending refund claim, or a material exposure for earlier periods, that is a CA conversation, not a blog conversation. Don't self-assess your way out of it.

And do not go back and edit old invoices. Under GST you cannot amend or delete an issued invoice — corrections happen through credit and debit notes, with their own deadlines.

The flip side: now you may owe RCM

The amendment cuts both ways, and this is the trap in the good news.

Place of supply for intermediary services now follows the recipient. When the recipient is you — an Indian freelancer paying a foreign intermediary — the place of supply becomes India, and that's an import of service. Under reverse charge, you pay the IGST and you issue yourself a self-invoice.

Concretely, if you pay a foreign platform or agent a commission for finding you clients, or a booking or brokerage fee to an overseas facilitator, that payment may now sit inside the reverse charge net where previously it arguably didn't. The mechanics — the self-invoice deadline, the exchange rate rule, where it goes in GSTR-3B — are in our post on RCM and self-invoicing for foreign services.

Your checklist

1. 1.Classify honestly. Run your engagement through the Circular 159 tests. If you supply on your own account, you were never affected — stop reading and go back to work.
2. 2.Confirm the effective date with your CA. Majority view is 30 March 2026. Get it in writing before you re-price anything.
3. 3.Read your contracts. Arrange, facilitate, procure, on behalf of vs deliver, develop, supply. Make the language match the commercial reality — not what you wish it said.
4. 4.File your LUT for FY 2026-27 before the next commission invoice goes out.
5. 5.Change the invoice template. Place of supply 96 – Outside India, GST nil, LUT declaration line, SAC code, and the amount in the foreign currency you actually bill in.
6. 6.Fix the return mapping. These invoices move to GSTR-1 Table 6A. Get this right the first month; amending export tables later is tedious.
7. 7.Ring-fence the past. Prospective only. Old periods stay under old law.
8. 8.Check your outbound payments for new RCM exposure on commission you pay overseas.

What this looks like day to day

Mavoin exists for exactly this kind of invoice: one client in Bengaluru paying in rupees with CGST and SGST, another in Delaware paying in dollars with a zero-rated export declaration and an LUT reference on the face of it. Both from the same place, both correctly formatted, both ready for GSTR-1 without a spreadsheet in between. ₹199/month, thirty-day trial, no card. Try it.

Last reviewed: July 2026. This post is general information about GST law as it stands in July 2026, not tax advice. Intermediary classification is heavily fact-specific and has generated a decade of litigation. Confirm your position — and the effective date of the amendment — with a qualified chartered accountant before changing how you invoice.