Applicability of GST for Merchant Exporters

Last updated : September 16th, 2024 05:25 pm

Applicability of GST for Merchant Exporters

Merchant exporters are those who are engaged in trading activity only. Further, the goods purchased are exported by the merchant exporter. Hence, a merchant exporter is not involved in any manufacturing activity, he just undertakes trading of the goods.

Under earlier law special tax benefit was provided to the merchant exporter for procurement of goods without payment of duty, however, the same is not available under Goods and Service Tax law. After several representation from the exporter, the Government of India, with effect from 23.10.2017, has exempted CGST and SGST above 0.05% and IGST above 0.1%. Meaning thereby that, from 23.10.2017, the merchant exporter can procure goods @0.05% CGST + 0.05% SGST and 0.1% IGST from domestic market.

In this article, we look at the applicability of GST for Merchant Exporters and the procedure to be followed by Merchant Exporters to avail benefit of the exemption notification.

Merchant Exporter under GST

Under GST, “Manufacturer Exporter” means a person who manufactures goods and exports or intends to export such goods. “Merchant Exporter” means a person engaged in trading activity and exporting or intending to export goods.

Application of GST for Merchant Exporter

Under GST, supply of goods or service and as per provisions of section 7 (5) (a) when the supplier is located in India and the place of supply is outside India, supply of goods or services or both, would be treated to be a supply of goods or services or both in the course of inter-state trade or commerce.

Since the activities of merchant exporter is covered under criteria of supply, the merchant exporter is required to obtain GST registration and follow all the rules and regulations, thereon. As per notification no. 40/2017-central tax (rate) and 41/2017-central tax (rate) both dated 23.10.2017, the registered supplier would supply the goods to the registered recipient on a tax invoice charging GST as follows :

• In case of intra-state supply – CGST is payable @0.05% and SGST is payable 0.05%
• In case of inter-state supply – IGST is payable @0.1%

Conditions for Availing Exemption

In order to avail the above exemption, the Merchant Exporter must fulfil the following conditions:

1. The registered supplier should supply the goods to the registered recipient on a tax invoice;
2. The registered recipient should export the said goods within a period of ninety days from the date of issue of a tax invoice by the recipient supplier;
3. The registered recipient should indicate the Goods and Service Tax Identification Number of the registered supplier and the tax invoice number issued by the registered supplier in the shipping bill or bill of export.
4. The registered recipient should be registered with an Export Promotion Council or a Commodity Board recognized by the Department of Commerce;
5. The registered recipient shoud place an order on registered supplier for procuring goods at concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier;
6. The registered recipient should move the said goods from place of registered supplier –
   1. Directly to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported; or
   2. Directly to a registered warehouse from where the said goods shall be move to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported;
7. If the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier should move to a registered warehouse and after aggregation, the registered recipient should move goods to the Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported;
8. In case of situation referred to in condition (vii), the registered recipient shall should receipt of goods on the tax invoice and also obtain acknowledgement of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; and
9. When goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier.

It is most important to note that the Merchant Exporter will not be eligible for the above mentioned exemption (payment of GST at concessional rates) if the Merchant Exporter fails to export the said goods within a period of ninety days from the date of issue of tax invoice.