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RCM on Intermediary Services: Who Is Liable When a Business Has Multiple GST Registrations?

By Swapnil Jangam & Co., Chartered Accountants

Businesses that use the services of foreign commission agents or intermediaries to procure export orders have always had to grapple with the question of GST under Reverse Charge Mechanism (RCM). A recent statutory change has made this question sharper — and, for businesses operating from more than one GST registration under the same PAN, more consequential.

The Change: Omission of Section 13(8)(b) of the IGST Act

With effect from 30 March 2026, Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 — the provision that earlier fixed the place of supply of intermediary services at the location of the supplier — has been omitted.

As a result, intermediary services no longer have a special place-of-supply rule. They now fall under the general provision of Section 13(2) of the IGST Act, which fixes the place of supply at the location of the recipient of the service.

This is a meaningful shift. Previously, many intermediary arrangements involving an Indian party and a foreign counterpart were treated as not amounting to an "export of service" or an "import of service" at all, because the place of supply stayed within India (the supplier's location) regardless of where the recipient was based. That special treatment is now gone.

Why This Matters for RCM

Where an Indian company avails the services of a foreign commission agent or intermediary, and the place of supply is now determined by the recipient's location under Section 13(2), the transaction can amount to an import of service. Where the conditions for Reverse Charge Mechanism are otherwise satisfied, it is the recipient in India — not the foreign supplier — who becomes liable to discharge GST on this import of service.

This raises the natural next question: who is the "recipient"?

Identifying the Recipient: Section 2(93) of the CGST Act

Section 2(93) of the Central Goods and Services Tax Act, 2017 defines "recipient" of a supply of service, essentially as the person who is liable to pay the consideration for that service, where consideration is payable.

The test, therefore, is not about who benefits commercially from the service, or where the underlying goods physically move. It is about:

• Who appointed the service provider (the intermediary)?
• Who is contractually obligated to pay for the service?
• In whose books is the liability recorded?
• Who actually remits the payment?

Whichever entity satisfies these criteria is the recipient, and it is that entity's GST registration which bears the RCM liability — regardless of any other GST registration the same PAN may hold elsewhere.

Where This Gets Complicated: Multiple GST Registrations Under One PAN

Many businesses today operate with more than one GST registration — a head office in one state and branch offices or factories in others, all under the same PAN. Export transactions, in particular, often involve one office negotiating and appointing agents, while goods are physically shipped from a different location.

This is precisely the situation where disputes tend to arise. The tax authorities may be inclined to link the RCM liability to the state from which goods were physically exported, reasoning that the commercial benefit of the intermediary's services (procuring the export order) accrued to that location.

However, this reasoning conflates two distinct things:

1. The place from which goods are exported — relevant to determining the exporter for customs and GST compliance on the supply of goods.
2. The recipient of the intermediary service — a separate, independent supply, determined strictly by the contractual and payment relationship as defined under Section 2(93).

Merely because goods move out of a particular state does not, by itself, make that state's GST registration the "recipient" of a service it neither appointed, contracted for, nor paid for. Unless the branch that shipped the goods can also be shown to have appointed the agent, borne the payment obligation, or reimbursed the head office for the commission, there is no legal basis to attribute the RCM liability to that branch.

Practical Steps for Businesses to Strengthen Their Position

Given the scope for interpretational disputes, businesses using foreign intermediaries — especially those with multi-state GST registrations — should consider the following:

1. Centralise the appointment and management of foreign agents at a single, clearly identified office, supported by internal policy or a Board Resolution to that effect.
2. Ensure invoices from the foreign agent are consistently addressed to the registration that is meant to be treated as the recipient.
3. Route all payments to the foreign agent through that same registration, avoiding any cross-reimbursement between branches that could blur the picture.
4. Record the commission liability and expenditure only in the books of the recipient registration.
5. Maintain supporting documentation — appointment letters, correspondence, and payment records — that consistently evidences which registration is the true recipient of the service.
6. Cross-check export documentation for internal consistency. Where goods are exported from one state but the commercial and agency arrangements sit with another, ensure that the Shipping Bill, Bill of Lading, LUT, and GSTR-1 do not create a documentation mismatch that could itself invite scrutiny, independent of the RCM question.

Conclusion

The omission of Section 13(8)(b) has brought intermediary services squarely within the general place-of-supply framework, and by extension, has made the question of RCM liability on such services far more relevant for businesses dealing with foreign agents. Where a business operates through multiple GST registrations, the liability to discharge RCM will follow the entity that is contractually and financially the recipient of the service — not the entity from which the underlying goods happen to be exported. Businesses would be well advised to organise their documentation and internal processes to reflect this clearly, well before the question is ever raised in an assessment or audit.

This article is intended for general awareness and does not constitute specific tax advice. Applicability may vary based on the facts of each case, and readers are advised to consult a qualified professional before acting on the above.