Budget 2026: FPIs using brokers get GST exemption for brokerage services

Union Finance Minister Nirmala Sitharaman presented the Union Budget for FY2026-27 on Sunday,

• FPIs using brokers get GST waiver on brokerage services in FY2026-27 Budget
• Change aligns brokerage services as export, making them zero-rated for GST
• Most FPIs use direct market access, so only broker-route FPIs benefit

Did our AI summary help?

Foreign Portfolio Investors(FPIs) who come via broker have received a tax relief via Union Budget for FY2026-27 announcement to waive of Goods and Services Tax(GST) on brokerage services availed. To be sure, this will benefit only those FPIs who have chosen to come into India through brokers, however a large portion of foreign funds operate without broker through direct market access(DMA) facility offered by exchanges.

Currently, the brokerage paid by foreign funds is considered ‘export services’ under GST rules. “Clause (b) of sub-section (8) of section 13 of the Integrated Goods and Services Tax Act, 2017 is being omitted so as to provide that the place of supply for "intermediary services" will be determined as per the default provision under section 13(2) of the IGST Act.” Said the budget memorandum.

Generally, FPIs are exempt from indirect taxes like GST. These also add costs to FPIs as they cannot claim tax credits in their home jurisdictions. FPIs from major jurisdictions including the US, Europe and Japan can claim input tax credit in their home country for some of the taxes they pay in India such as capital gains tax. However, none of the countries provide similar mechanism for claiming input credit for GST paid in India, say market experts.

“Under the current regime, Indian stock brokers providing brokerage services to FPIs located overseas have been unfairly burdened with 18 percent GST, simply because the place of supply was tied to the supplier’s location in India. By omitting the specific intermediary provision in Section 13(8) of the IGST Act, the Budget aligns these services with the default rule—placing the supply at the recipient’s location, which is outside India for FPIs. This effectively classifies such brokerage services as exports of services, making them zero-rated (Nil GST), subject to the standard export conditions like receipt of payment in convertible foreign exchange or RBI-permitted Indian rupees under Section 2(6) of the IGST Act.” said Suresh Swamy, Partner, Price Waterhouse & Co. LLP.