prpri Merchant Export Under CGST Act 2017 Merchant Export Under CGST Act 2017

Merchant Export Under GST Act 2017 – GST Series Part 36

1. MERCHANT EXPORT MEANING: Merchant Export means an activity by a trader who exports or intends to export goods. The person engaged in trading activity and export or intend to export goods is a Merchant Exporter. A merchant exporter is mainly engaged in the export of goods and not services.

1.1 The Merchant Exporter purchased goods from the manufacturer & exports the same goods outside India.

1.2 In the case of exports by the manufacturer through merchant exporter, the provision was that the manufacturer was required to pay tax, and the merchant exporter was required to claim the refund. This was blocking funds of exporters and exports were suffering.

2. PROVISIONS FOR MERCHANT EXPORT : Provisions relating to tax on export of goods have been amended vide Notification Nos. 40/2017-CT (Rate), 41/2017-IT (Rate), and 40/2017 (rate) dated 23-10-2017. The revised provisions are as follows.

2.1 The merchant exporter should be registered under GSTIN and Export Promotion Council or Commodity Board recognized by the Department of Commerce.

2.2 The merchant exporter should place an order to the manufacturer and its copy shall be provided to the jurisdictional tax officer of such manufacturer.

2.3 The registered supplier shall supply goods to merchant exporter at a concessional rate of 0.1% IGST (or CGST 0.05% + SGST 0.5%).

2.4 Goods should be dispatched directly from the place of the manufacturer to port, ICD, Airport of Land customs station from where goods are to be exported.

2.5 Goods can also be sent to a registered warehouse from where goods can be sent to the port, ICD, Airport of Land customs station from where goods are to be exported.

2.6 The goods can be aggregated at the registered warehouse and then sent to the port, ICD, Airport of Land customs station from where goods are to be exported. In such a case, the merchant exporter shall endorse receipt of goods on the tax invoice and also the acknowledgment of receipt of goods in the registered warehouse. These should be provided to the manufacturer as well as to the jurisdictional tax officer of such manufacturer

2.7 The merchant exporter is required to export the goods within 90 days from the date of issue of the tax invoice.

2.8 The merchant exporter shall indicate the GSTIN of the supplier and tax invoice number of the manufacturer in the shipping bill or bill of export, as applicable.

2.9  After export, the merchant exporter shall provide a copy of the shipping bill or bill of export containing details of the manufacturer’s GSTIN & his tax invoice with proof of filing of the export general manifest (EGM) or export report.

3. SALIENT FEATURES OF MERCHANT EXPORTS

(a) Supply by the manufacturer to a trader for export is Merchant Export & Not Zero Rated Supply

(b) Such supply cannot be made under LUT /BOND

(c) GST is payable at the concessional rate at the time of supply

(d) Refund of Tax can be claimed by the manufacturer under Inverted Duty Structure

(e) A merchant exporter can claim a refund of tax (concessional) paid to the manufacturer.

(f) Merchant exporter is mainly engaged in the export of goods and not services.

3.1 EXPORT BY MERCHANT EXPORTER- SALIENT FEATURES  

(a) When a merchant exporter exports the goods, it is a Zero Rated Supply.

(b) A merchant exporter can export the goods under LUT/Bond only.

(c) He cannot export under the IGST payment route.

4. STATUTORY PROVISIONS

Rule 96(10) If goods were procured on payment of 0.1% GST, export on payment of IGST not permissible.

If still IGST is paid on export of goods or services, its input tax credit is not available

Rule 96(10) of CGST Rules, inserted on 23-1-2018 but with retrospective effect from 23-10-2017
Rule 89(4B) If the manufacture has claimed the benefit of merchant exports and the merchant exporter makes the zero-rated supplies.

Such merchant exporter is eligible to claim a refund of Input Tax Credit availed in respect of other input & input services

5. PAYMENT OF CONCESSIONAL TAX BY MANUFACTURER IS NOT MANDATORY – Payment of 0.1%/0.05% tax by the manufacturer is conditional and not mandatory. The manufacturer can supply goods to merchant exporter on full payment of tax at a normal rate – CBI&C circular No. 37/11/2018-GST, dated 15-3-2018

5.1 In such a case, the merchant exporter can export goods on payment of GST and claim the refund. Alternatively, he can export under bond/LUT and claim a refund of Input Tax Credit of GST paid by the supplier.

6. MERCHANT EXPORT – BILL TO SHIP TO TRANSACTION: A merchant exporter can place the order to the manufacturer for delivering goods directly to the customer outside India. This situation can be explained with the help of the following Illustration:

6.1 ILLUSTRATION

Mr. X a merchant exporter  place an order to ⇒  Mr. Y  ( manufacturer) & instruct Mr. Y  to supply directly to ⇒  Mr. Z ( Customer outside India)

Mr. Y will

Mr. X                        ⇐               Bill to Mr. X  & Ship to                  ⇒            Mr. Z

The transaction will be export in the hand of Mr.X. As a merchant exporter, he will file a shipping bill, generates an export invoice for export under LUT and claim a refund of 0.1 % GST charged by Mr. Y (manufacturer).
It will be a supply to merchant exporter in the hands of Mr. Y (manufacturer) who will be billing to Mr.X at a concessional rate of 0.1 % and claim a refund under Inverted duty structure

7. The procedure to claim a refund has been specified in CBI&C circular No. 94/13/2019-GST dated 28-3-2019/Circular No. 125/44/2019 dated 18-11-2019.

The author can be approached at caanitabhadra@gmail.com

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3 Comments

  1. Raghunathan says:

    Hello sir, we are dealing exports past three years this year first time we are dealing merchant export under 0.1% gst on input material and done export but unfortunately we are not mentioned supplier third party details on shipping bill, what is the remidy for the same to close this issue.

  2. Bharat says:

    Sir how are we stating that a merchant exporter cannot be a manufacturer as word merchant exporter is no were defined neither in cgst act nor cgst rules and on reading od notification 40 of cost act there also it no were mentioned. Can you pls let me know were it is mentioned that merchant exporter cannot be a trader

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