The GST Council was expected to consider a proposal on 7 October 2026 that could let some services performed in India for overseas customers qualify as exports—even when the resulting goods remain in India. As of the reporting published on 5 and 6 October, it was only a proposal, not an approved or effective rule. The issue is export classification and place of supply, not a proposed reduction in GST rates on electronics products.
What change is the GST Council considering?
Reports ahead of the Council’s 7 October 2026 meeting said it may consider changing how the place of supply is determined for certain services performed in India for a foreign customer. Business Standard described the existing treatment in the scenario it covered as following where the work is performed. The reported proposal would instead look to the overseas customer’s location. Electronics For You BUSINESS also reported that the proposal could apply to electronics and semiconductor work, including processing, assembly and testing.
In the example described by Business Standard, a foreign company sends raw materials or semi-finished goods to an Indian unit for processing, then directs the finished or processed goods to a buyer in India. Under the reported proposal, the service might receive export treatment because the customer is overseas, even though the goods do not leave India. These details were attributed to people familiar with the proposal; the reports did not provide an official Council decision or final legal wording.
How does the reported approach compare with the current one?
| Question | Treatment described in the report | Reported proposal |
|---|---|---|
| What determines place of supply? | Where the work is performed, according to Business Standard’s description of the scenario. | The overseas customer’s location, if the proposal is adopted. |
| Must the goods physically leave India for the described scenario to qualify as an export? | The reporting describes the current treatment as tied to the place where work is performed. | Not necessarily: the proposal could allow export treatment even if goods stay in India. |
| Is the change in force? | No change was established in the reports published before the expected meeting. | No approval, effective date or final eligibility test was established in the reviewed coverage. |
This is a reported comparison for the scenario in the news coverage, not legal advice or a complete statement of GST rules for every contract-manufacturing arrangement. Businesses should not assume the proposed customer-location test applies unless a change is formally recommended and legally brought into effect.
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Which businesses or services could be affected?
Electronics For You BUSINESS identified electronics and semiconductor processing, assembly and testing as potential applications. Business Standard also mentioned repair, testing, certification, storage and job work, as well as possible relevance to pharmaceuticals and chemicals. The reporting describes possible scope only; it does not establish which industries or transactions would be covered in any final rule.
The proposal is most relevant to business models in which an Indian service provider performs work for a foreign customer and the goods remain in India or are sent onward to another location selected by that customer. A contract manufacturer should not infer eligibility from the foreign customer’s location alone: the proposal’s final terms and any applicable legal requirements were not available in the reports.
Why might the change matter to manufacturers?
The reports frame the proposal as a possible way to reduce tax cascading—tax costs accumulating through successive business steps—in cross-border supply chains. In a model where an Indian unit works on goods for a foreign customer but does not ship them abroad, export treatment could potentially make local manufacturing more competitive. Nimish Bhatia, identified in the reports as a Partner at PW&Co LLP, said a shift to the customer’s location could remove cascading in business models involving goods sent to a Free Trade Warehousing Zone or a Special Economic Zone for further processing.
That is a potential effect, not a measured outcome. The reports provide no quantified savings, confirmed eligibility test or guarantee that a change would improve competitiveness or investment. The practical effect would depend on the final rule and the details of each transaction.
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What is known about the proposal’s status?
The available reports were published before the Council’s expected 7 October 2026 discussion. They establish that the Council may consider the proposal, not that it approved or implemented it. The GST Council’s official description says the Council makes recommendations on GST matters, including place-of-supply principles. A recommendation is distinct from a legally effective change: the 2026 Budget speech says listed GST law changes generally take effect from dates to be notified in coordination with states following Council recommendations, but it does not address this particular proposal.
Accordingly, the reports do not establish whether the Council discussed or recommended the proposal, whether a notification followed, or when any rule might take effect. Until an official recommendation and applicable notification are confirmed, businesses should treat the reported change as unapproved and avoid relying on it for tax or contract decisions.
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How this differs from the 2025 electronics GST rate cuts
This proposal concerns the place-of-supply and export classification of services performed in India for a foreign customer. It is separate from the GST rate cuts on selected electronics and ICT goods announced in 2025. The Ministry of Electronics and Information Technology’s September 2025 release covers reductions on categories including televisions, monitors, projectors and specified electric accumulators; it does not establish the status of the contract-manufacturing proposal.
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