Concept of Merchant Exporter
  
With recent changes of indirect tax, the Council noticed the major difficulties for the export sector are on account of delays in refunds of IGST and input taxes on exports. Due to delay of taxes which ideally resulting into blockage of working capital to export business

To prevent cash blockage the Council approved new scheme. Merchant exporters will now have to pay nominal GST of 0.1% for procuring goods from domestic suppliers for export. Merchant exporter can buy goods at 0.1% for export of goods. 
It is clarified that the exporter will be eligible to take credit of the tax paid by him. The supplier who supplies goods at the concessional rate is also eligible for refund on account of inverted tax structure.
 

Merchant Exporter

A person who is engaged in the activity of merchant exports is called Merchant Exporter.

Thus, a merchant exporter is a person who is involved in trading activity and exporting or intending to export. They do not have a manufacturing unit. They buy goods from a manufacturer-exporter and then ship them to foreign customers.
 

Procedure in Case of Exports

Under the GST regime, the procedure of exports has been simplified. There are three alternatives available:

1. Make an export under bond/LUT, and then the unutilised input tax credit can be claimed as refund.
2. Make an export by paying off IGST and then claim a refund.
3. Make an export by opting for the Special Relief Scheme of buying goods at 0.1% GST.

Procedure to be Followed Under Merchant Exports
T

he government has provided special relief to the merchant exporters by way of reducing the GST rate to 0.1% for purchasing goods from domestic suppliers. But, he needs to fulfil the below conditions for availing such concessional rate relief:

1. The tax invoice for the procured goods should clearly state the GST rate at 0.1%.
2. Such goods should be exported within 90 days of the issue of a tax invoice.
3. The GSTIN and the tax invoice number of the supplier should be mentioned on the shipping bill.
4. Such Merchant Exporters should be registered with an Export Promotion Council/Commodity Board.
5. A copy of the order placed at the concessional rate shall be provided to the jurisdictional tax officer of the registered supplier.
6. Such goods shall be directly moved to the place from where it shall be transferred to the port/ICD/Airport/LCS. This condition prevails even if the goods are purchased from multiple registered suppliers.
7. On export of goods, a copy of the shipping bill/bill of export along with the proof of EGM and export report shall be filed with the registered supplier as well as its jurisdictional tax officer.

Further, if the merchant exporter fails to export the goods within 90 days from the date of issue of tax invoice, then the registered supplier cannot avail the benefit of the concessional tax rate.

Refund Process in case of Merchant Exporter

 
Below are some of the scenarios revolving around the refund process where a merchant exporter is involved:

1. Where a merchant exporter exports goods without payment of tax. Procures goods at 0.1% and then claims refund of the same: In this case, a supplier supplies goods to the merchant exporter charging GST at 0.1% and the merchant exporter exports the goods without payment of tax. As per Section 54(3) of the CGST Act, the merchant exporter can claim a refund of the unutilised ITC at the end of a tax period in case of zero-rated goods or goods involving inverted tax structure.
2. Where a supplier of merchant exporter procures goods from another supplier and claims refund under Inverted Duty Structure: In this case, there are two suppliers. The first supplier makes a supply to the second supplier at standard GST rates. But, the second supplier makes the supply to the merchant exporter on a concessional rate of 0.1%. Here, the 2nd supplier is not directly exporting goods but providing goods to merchant exporter. Thus, as per Section 54(3), the second supplier can claim a refund of ITC under inverted tax structure (rate of tax on inputs is higher than the rate of tax on outputs).
3. Where a supplier is supplying to a merchant exporter at regular rate and exports are done with the payment of tax (IGST paid): In this case, the concessional tax rate on inputs can not be availed by the merchant exporter, as he decides to export goods by making payment of tax (IGST). Hence, the standard tax regime will be followed by the supplier, where ITC shall be used for payment of output tax and the balance liability is to be paid in cash. Merchant exporters can claim a refund of both unutilised ITC and IGST paid against zero-rated supply.

Thus, it can be ascertained that merchant exports are similar to regular exports. They boost the country’s economy by bringing in foreign currency. Therefore, the government has provided concessional rate benefits in the case of merchant exporters which helps them reduce their working capital requirements.
 
 

The author can be however contacted for further clarification at 9654182791 or via mail at caajay92@gmail.com
(The author is the founder of Solution Tax (https://www.solutiontax.in/) an platform for filing income tax returns, company incorporation, accounting/bookkeeping, audits related compliances etc.)

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