When The Legislature Erases A Law Do 'Omissions' Count as a 'Repeal' Under the General Clauses Act? — An Analysis Through the Lens of Proposed Omission of Section 13(8)(b) of the IGST Act, 2017 by the Finance Bill 2026

Introduction

The Finance Act, 2026, has made an important legal development under the Goods and Services Tax (GST) framework. Among several amendments across various tax laws, one stands out not for its prospective commercial impact, but for the profound retrospective legal questions it has triggered: the omission of Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act), which governs the place of supply (POS) for intermediary services.

Under the pre-omitted provision, the POS for intermediary services was the location of the supplier, meaning Indian intermediaries serving foreign clients were treated as making a domestic supply, attracting GST. The omission removes this rule entirely, falling back on the general provision in Section 13(2). What was previously a taxable domestic supply becomes a zero-rated export of services, eligible for refund of input tax credit or integrated tax paid.

A large number of taxpayers, especially exporters of services, have suffered denial of export refunds and demands for output tax after their genuinely export-classifiable services were reclassified as "intermediary" services under the old Section 13(8)(b). Rule 86(4B) of the CGST Rules requires that an erroneous refund repaid with interest be recredited via PMT3A to the Electronic Credit Ledger, available to discharge output tax on inter-State supplies. The key question is whether this omission applies retrospectively from 1 July 2017, settling all disputes, or only prospectively from 30 March 2026, leaving years of litigation to be resolved on their own merits.

Liberalisation Without a Safety Net

Judicial decisions across multiple High Courts and CBIC's Circular No. 159/15/2021-GST have stressed that classification as an intermediary service depends entirely on the substance of the transaction, turning on four limbs: a minimum of three parties, two or more distinct supplies, the supplier not acting as principal to the main transaction, and a facilitative (not principal-to-principal) role.

This fact-dependence has made the law litigation-prone. Tax authorities have often applied the intermediary tag mechanically, forcing exporters to litigate based on actual contracts and operations. Once the tag applies, POS shifts into India, converting a zero-rated export into a taxable supply and denying refund. Many such cases remain pending without finality.

The 2026 omission, introduced without any savings clause, leaves open the fate of pending proceedings, demands, and disputes accumulated over the past eight years.

The Common Law Foundation

Common law principles, inherited by India during the colonial period, remain interpretative aids unless displaced by statute. The relevant doctrine here is the Common Law Doctrine of Statutory Obliteration: when a provision is repealed or omitted, it is treated as erased from the statute book as if it never existed.

However, the doctrine recognises the qualification of "transactions past and closed" — matters that have already attained finality are insulated from subsequent statutory removal. The far more significant category is matters still alive in litigation: demands under challenge and unadjudicated show cause notices. For these, whether the omission extinguishes the jurisdictional foundation of proceedings becomes urgently relevant.

The General Clauses Act, 1897

Section 6 of the General Clauses Act, 1897 provides the statutory answer to the uncertainty that unguarded removal of legislation could cause:

Section 6 codifies the doctrine of saving: repeal of a law is not the same as declaring it never existed. If Section 6 applies, pending proceedings, demands, and show cause notices under Section 13(8)(b) would survive and remain enforceable as if the omission never took place. But the threshold question is whether an "omission" falls within the word "repeal" — a question the courts have answered inconsistently over five decades.

Rule 86(4B) of the CGST Rules mandates that where an erroneous refund is repaid along with interest, the refund will be recredited via PMT3A to the Electronic Credit Ledger (ECrL), available to discharge output tax on inter-State supplies.

The Four Pillars of the Debate

The Legal Landscape Today

Reading the four cases together, the law currently operates on a bifurcation based on the nature of the repealing instrument, not simply on omission versus repeal.

For subordinate legislation — rules omitted by notification — Rayala, Kolhapur, and Hikal remain unambiguous: Section 6 does not apply, and pending proceedings lapse absent a savings clause or pari materia provision, because the repealing instrument is not a Central Act or Regulation.

For Central Act provisions omitted through a Finance Act or other Parliamentary legislation, Fibre Boards represents the current judicial position: "repeal" in Sections 6 and 24 includes express omissions by virtue of Section 6A. The omission of Section 13(8)(b) falls in this second category, having been effected through the Finance Act 2026 — a Central Act — meaning the primary objection in Rayala, Kolhapur, and Hikal is absent here, and on the Fibre Boards analysis, Section 6 would be attracted.

Do the Issues Actually Resolve?

A constitutional tension remains: Fibre Boards was decided by a two-judge bench, while the Constitution Bench decisions it effectively overrides were decided by five judges. Strictly, a smaller bench cannot override a Constitution Bench, however sound its reasoning. In practice, whether the omission of Section 13(8)(b) attracts Section 6 remains genuinely litigable.

Second Side of the Coin

The omission also creates new compliance consequences. Indian businesses receiving intermediary services from suppliers outside India previously fell outside India's POS under Section 13(8)(b). With its omission, the general rule in Section 13(2) now applies, shifting POS for such inbound services to the recipient's location — squarely within India — making reverse charge mechanism (RCM) liability unambiguous.

Conclusion — A Legislative Proposal That Demands a Legal Answer

The omission is commercially a liberalising measure long awaited by the intermediary services sector, correcting a structural anomaly and improving India's attractiveness as a global hub, particularly for GCCs. But implemented as a bare omission without a saving clause, transitional provision, or express statement of legislative intent, it has opened significant legal uncertainty.

Rayala and Kolhapur established the still-surviving textual ground that Section 6 requires a Central Act, not mere omission. Fibre Boards, using Section 6A and the per incuriam doctrine, demonstrated that "repeal" includes express omission. Fibre Boards itself noted this was not a novel argument — General Finance Company & Anr. v. Assistant Commissioner of Income Tax (2002) 7 SCC 1 had acknowledged the argument's force but declined to refer it to a larger bench. Hikal confirmed the orthodoxy for subordinate rules while endorsing the Fibre Boards critique.

Until a Supreme Court Constitution Bench definitively resolves whether "repeal" in Section 6 includes express omission through a Central Act, every stakeholder — service providers seeking refunds and Revenue authorities pursuing past demands — must navigate an unsettled landscape. A savings clause in the Finance Act 2026 could have closed this gap entirely; in its absence, the five-decade-old debate is live, consequential, and headed to court.