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The SharingCapability set for this SPOSite will not take effect until the ExternalUserSharingOnly' SharingCapability is also enabled on the SPOTenant.

Mahesh Neelannavar 96 Reputation points
2020-08-14T08:01:54.833+00:00

Microsoft made it simple now

SharePoint
SharePoint
A group of Microsoft Products and technologies used for sharing and managing content, knowledge, and applications.
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  1. Mahesh Neelannavar 96 Reputation points
    2020-08-14T08:06:42.073+00:00

    Ok, Now Microsoft made it simple by availing permissions options at tenant level settings first and then at site collection level in modern SPO Site administration

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