Analysis of GST Structural Reforms in Union Budget 2026-27

The Union Budget 2026-27 has signaled a maturing of the Goods and Services Tax (GST) regime in India. Moving away from the volatility of rate fluctuations, the focus has shifted squarely toward administrative ease and dispute resolution. For the professional community and the assessee alike, the proposed amendments address structural bottlenecks that have plagued the indirect tax system for nearly a decade.

Rather than tinkering with tax slabs, the Finance Ministry has targeted specific areas of friction—namely intermediary services, refund blockages, and the treatment of commercial discounts. This analysis explores the implications of these changes for the assessee.

1. Paradigm Shift for Service Exporters: Intermediary Services

For years, the Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) sectors have been embroiled in litigation regarding the Place of Supply (PoS). The Budget proposes a critical amendment to the IGST Act, 2017 by omitting Section 13(8)(b).

The Pre-Amendment Scenario

Previously, under Section 13(8)(b), the place of supply for intermediary services was deemed to be the location of the supplier (i.e., India), even if the recipient was located outside India. This created a peculiar situation where services rendered to foreign entities, paid for in convertible foreign exchange, were denied "export" status and subjected to GST.

Impact of the Omission

With the removal of this provision, the PoS will now be governed by the general rule—the location of the recipient.