India's GST Council Clarifies 'Intermediary Services' for Education Exporters
India's GST Council has recommended amending the law to clarify the definition of 'intermediary services', benefiting Indian service exporters. This follows the Supreme Court's dismissal of a GST department petition against KC Overseas Education, which ruled that services to international universities are not 'intermediary' supplies and thus not liable to GST. The amendment is likely to be prospective, applying to invoices raised after its notification.
The GST Council's recommendation aims to enhance India's competitiveness in the international education value chain by reducing the tax burden on service exporters and preserving consultancy margins. It also provides greater certainty and protection for study-abroad consultancies that receive foreign exchange directly from overseas universities. Even without collecting direct GST on overseas education fees, the government can capture revenue through corporate and income taxes, withholding regimes and treaties, indirect domestic taxation via value chains, targeted digital or service levies, and modest regulatory fees linked to facilitation.
The amendment, if passed, could resolve show-cause notices amounting to Rs. 3,357 crore (approximately £319 million) issued to organisations in high-export sectors. It is likely to apply only to invoices raised after the law is notified and comes into effect.
The GST Council's recommendation and the Supreme Court's ruling clarify the tax status of services provided by Indian entities to international universities. The prospective amendment, if passed, will benefit Indian service exporters, maintain competitiveness, and potentially resolve significant tax notices. However, the exact impact will depend on the final wording of the amendment and its effective date.
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