Export through Merchant Exporter under GST Regime

Merchant Export
  •      ·      Merchant Export:-
Merchant Export is a method of Trading Export which is equally important to the Manufacturer Exporter. The person who is engaged in the merchant export is called as ‘Merchant Exporter.
  •      ·      Merchant Exporter:-
Merchant Exporter means a person engaged in trading activity for exporting or intending to export goods. Merchant Exporters buy goods from the Indian manufacturers or traders and sell them into global market in his name. Mostly Merchant Exporter does not have Manufacturing or Processing Unit.
→  Generally, MSME Units or small manufactures may not have sufficient knowledge about Global Market or procedural matter required to do at the time of export, because of that they were not interested in exporting their goods into international market. In result, India was losing its opportunity to earn valuable foreign assets in the form of foreign exchange. Hence, government has introduced a concept of Merchant Exporter through its “Foreign Trade Policy”.
→   Here, question may arise that what is the difference between Manufacturer Exporter and Merchant Exporter.
Manufacturer Exporter
Merchant Exporter
Manufacturer Exporter means a person who exports goods manufactured by him or intends to export such goods.
Merchant Exporter means a person engaged in trading activity for exporting or intending to export goods.
Acquires Raw Material      Process Raw Material in its own factory or units      Exports finished goods on its own name.
Obtains Order from global market    Give order to Indian MSME or small businesses             
Procures goods from MSME or small businesses       Exports the goods in its own name.
→  In this article we shall discuss how this entire trading motion works.
→  Export through Merchant Exporter is governed by Notification No.-40/2017-Central Tax (Rate) and Notification No.-41/2017-Central Tax (Rate) dated 23/10/2017.
→ According to said notification supplier (MSME Unit/ Small business) shall supply goods to Merchant Exporter ignoring normal GST rate for that goods by charging GST, 
Type of Supply
Rate of GST
Intrastate Supply
CGST=0.05 % of Value of Supply
SGST=0.05 % of Value of Supply
Interstate Supply
IGST=0.10 % of Value of Supply
  •      ·Conditions:-
  1. Merchant Exporter is required to obtain GSTIN and follow all rules and regulations thereon.
  2. The supplier (MSEM Units/Small businesses) should supply the goods to the recipient (Merchant Exporter) on a tax invoice.
  3. The recipient (Merchant Exporter) should export the said goods within a period of ninety days from the date of issue of a tax invoice by the supplier (MSEM Units/Small businesses).
  4. The recipient (Merchant Exporter) should specify the GSTIN of the supplier (MSEM Units/Small businesses) and the tax invoice number issued by the supplier (MSEM Units/Small businesses) in the shipping bill or bill of export.
  5. The recipient (Merchant Exporter) should be registered with an Export Promotion Council or a Commodity Board recognized by the Department of Commerce.
  6. The recipient (Merchant Exporter) should place an order on supplier (MSEM Units/Small businesses) for procuring goods at concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the supplier (MSEM Units/Small businesses).
  7. The recipient (Merchant Exporter) 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.
  8. If the recipient (Merchant Exporter) intends to aggregate supplies from multiple suppliers(MSEM Units/Small businesses) and then export, the goods from each supplier (MSEM Units/Small businesses) should move to a registered warehouse and after aggregation, the recipient (Merchant Exporter) should move goods to the Port, Inland Container Deport (ICD), Airport or Land Customs Station from where they shall be exported.
  9. In case of situation referred to in condition No.-8, the recipient (Merchant Exporter) shall get 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 supplier (MSEM Units/Small businesses)  as well as to the jurisdictional tax officer of such supplier (MSEM Units/Small businesses).
  10. When goods have been exported, the recipient (Merchant Exporter) shall provide copy of shipping bill (SB) or bill of export (BOE) containing details of GSTIN and tax invoice of the supplier (MSEM Units/Small businesses) along with proof of Export General Manifest (EGM) or Export Report having been filed to the supplier (MSEM Units/Small businesses) as well as jurisdictional tax officer of such supplier (MSEM Units/Small businesses)


→  If Merchant Exporter fails to export within 90 days from the date of issue of tax invoice at that moment Merchant Exporter shall become ineligible for the above mentioned exemption.
  • ·     Clarification in respect of Merchant Export:-
1.   It is clarified that the benefit of supplies at concessional rate is subject to certain conditions and the said benefit is discretionary. The option may or may not be availed by the supplier (MSME Units/Small Businesses) and / or the recipient (Merchant Exporter) and the goods may be acquired at the normal applicable tax rate.
2.   It is also clarified that the Merchant Exporter will be eligible to take credit of the tax paid by him @ 0.05%+0.05% or 0.10%.
3.   The supplier who supplies goods at the concessional rate is also Eligible for Refund on Account of Inverted Tax Structure as per the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the CGST Act-2017.
4.   It may also be noted that the Merchant Exporter of such goods can export the goods only under LUT / bond and cannot export on payment of integrated tax per Rule 96(10) of the CGST Rules-2017.
  • ·      Advantages of Merchant Exporters:-
→    The merchant exporter takes care of all troubles involved and accepts all export and payment risks.
→    MSME Units or Small Businesses do not have to employ money on market exploration.
→    They are frequently arranging overseas buyers and provide sales opportunities.
→    The manufacturer can focus on production.
→    Export entry through merchant exporters is the easiest and least costly.
→    Export in any way enable saturation of product and brand image in the overseas markets.

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