GST Council Clears Export-of-Services Reforms and Input-Service Refunds from 1 November 2026

What changed, who it affects, what to do: At its 57th meeting in October 2026, the GST Council recommended two long-pending fixes to how services qualify as "exports" under the IGST Act, plus a change that lets exporters claim refunds of input-service tax stuck under the inverted duty structure for credit availed on or after 1 November 2026. The recommendations still need legislative amendment and CBIC notification to take effect, but they signal a clear direction for India's service exporters.

What Happened

The Council made three recommendations that matter for service exporters:

1. Export-of-services definition. It recommended omitting sub-clause (v) of the "export of services" definition in Section 2(6) of the IGST Act — the condition that the supplier and recipient must not be "merely establishments of a distinct person." Removing it would open the door for an Indian company supplying a foreign client through an overseas branch or related establishment to treat those supplies as exports.

2. Place of supply. It recommended omitting Section 13(3)(a) of the IGST Act, which currently fixes the place of supply for certain services performed on goods physically made available by the recipient at the location where the work is done. Without it, the default rule in Section 13(2) — the recipient's location — would apply. This could help India-based testing, repair, certification, calibration and research providers serving foreign clients treat such work as an export of service.

3. Inverted-duty refunds on input services. It recommended amending the proviso to Section 54(3) and the CGST Rules to allow refunds of accumulated input tax credit on input services (and capital goods) under the inverted duty structure. For input services, the refund is proposed for credit availed on or after 1 November 2026; for capital goods, for credit availed on or after 1 April 2027, spread over 60 months.

Alongside these, the Council reiterated faster refund processing — a 10-day acknowledgement window and 90% provisional, risk-based sanction of zero-rated and inverted-duty claims.

Why This Matters / Background

Two structural problems have long frustrated service exporters. First, the "distinct person" condition meant genuine exports routed through an overseas branch could be denied export (zero-rated) treatment. Second, Section 13(3)(a) taxed job-work-style services — testing, repair, certification — performed in India on goods supplied by a foreign customer as if they were domestic, even when the real recipient sat abroad. Both pushed GST onto what are, in substance, foreign-earning activities.

Separately, the inverted duty structure — where inputs are taxed higher than outputs — left credit stranded. Refunds were historically limited to inputs (goods); extending them to input services and capital goods unblocks working capital for exporters and manufacturers alike.

Who Benefits

IT and IT-enabled services, global capability centres, engineering and R&D service providers, testing and certification labs, repair-and-return operations, and back-office and professional-services firms serving overseas clients stand to gain from the export-of-services and place-of-supply changes. Manufacturers and exporters sitting on accumulated inverted-duty credit on input services gain from the refund change.

What Exporters Should Do Now

• Map your service-export flows that today fail the "distinct person" test or fall under Section 13(3)(a), and quantify the GST currently borne, so you can act quickly once the amendments are notified.
• If you carry accumulated inverted-duty credit on input services, plan to track credit availed on or after 1 November 2026 separately, since that is the proposed cut-off for refund eligibility.
• Do not change your tax positions yet — these are recommendations, not law. Treat 1 November 2026 as a planning anchor, not a settled rule.
• Engage your GST advisor and, where relevant, your export promotion council, to file representations on transitional and procedural details.
• Review refund-readiness: clean up invoice-level data and GSTIN matching so you can use the faster, risk-based refund route once it goes live.

The Bigger Picture

These fixes, taken with the Finance Act 2026 repeal of the Section 13(8)(b) "intermediary" rule, point to a GST regime that is steadily removing the quirks that denied zero-rating to legitimate service exports. India's services exports are a growing share of total exports, and aligning GST treatment with economic reality improves competitiveness. The gains are real but not automatic — each change depends on the eventual statutory amendment and CBIC notification, and the fine print on conditions will matter.

Frequently Asked Questions

Are these changes in force now? No. They are GST Council recommendations. They require legislative amendment and CBIC notification before they apply.

What is the 1 November 2026 date? It is the proposed cut-off for claiming inverted-duty refunds on input services — refunds would apply to credit availed on or after that date.

Does the place-of-supply change mean all testing/repair for foreign clients becomes an export? Not automatically. Removing Section 13(3)(a) shifts the default place of supply to the recipient's location, which can enable export treatment, but other export conditions (payment in forex, a distinct recipient) still apply.

When do capital-goods inverted-duty refunds start? For credit availed on or after 1 April 2027, spread over 60 months, per the recommendation.

Conclusion

The 57th GST Council's export-of-services and refund recommendations are a meaningful step for India's service exporters and inverted-duty-affected manufacturers. The right move now is preparation — mapping exposure, isolating post-1 November input-service credit, and getting refund data in order — while waiting for the statutory amendments and CBIC notifications that will convert these recommendations into enforceable law.

This is general guidance based on reported GST Council recommendations. Confirm the final position against the GST Council's official press release and subsequent CBIC notifications (cbic-gst.gov.in) before acting.