India scraps intermediary clause, boosting IT and GCC exports
MUMBAI, INDIA — India’s $283 billion outsourcing industry has gained a major reprieve after India’s Goods and Services Tax (GST) Council decided to scrap the controversial “intermediary” clause.
The move clears long-standing hurdles for IT services, global capability centers (GCCs), and e-commerce firms, paving the way for smoother exports, fewer disputes, and stronger global competitiveness.
Long-running tax hurdle lifted
For years, Indian IT and support service providers faced uncertainty over how their work was classified under GST. Services labeled as “intermediary,” where a company merely facilitated a deal between two other parties, were not recognized as exports. This meant they were taxed within India, denied input tax credits, and often dragged into protracted litigation.
The issue was particularly painful for GCCs, the Indian arms of multinational corporations that provide critical IT, R&D, and digital services to their global parents. Even though the end client was based overseas, these services often failed to qualify as exports under the previous rule.
Industry groups like Nasscom long argued that this created unnecessary friction and hampered the ease of doing business.
The GST Council’s decision removes the location-based condition for “intermediary services.” Now, the tax treatment will be determined by where the service recipient is located. If that’s abroad, the service qualifies as an export, unlocking long-denied benefits.
Boost for outsourcing and GCC growth
Industry experts predict that the change will have an immediate impact on India’s outsourcing sector, which employs millions and contributes significantly to the country’s export revenues.
GCCs, which are growing at over 40% annually, contribute more than $64 billion to India’s exports. The removal of the clause reduces tax costs, frees up working capital, and eliminates a key source of litigation risk.
In the report of The Economic Times, Ashish Aggarwal, vice president of public policy at Nasscom, said, “This is a big ease of doing business reform,” noting that the risk of misclassification is now gone.”
What remains unclear is whether the reform will apply retrospectively to settle ongoing disputes or only prospectively.
Still, the industry views the decision as a strong step forward. As Gaurav Vasu of UnearthInsight put it, “It restores their ability to benefit from export provisions under GST, thereby reducing the overall tax cost and improving the financial viability of GCC operations in India.”
By lifting a regulatory cloud, India has strengthened its case as the world’s outsourcing hub, giving IT firms and GCCs more confidence to expand globally.
