What is Merchant Export and Who is a Merchant Exporter?
Merchant exports generate foreign exchange for the country like normal exports and are mainly engaged in the export of goods and not services. The person who is engaged in the merchant export is called a ‘Merchant exporter’. Unlike manufacturer exporters, merchant exporters do not manufacture any goods they simply purchase goods from a manufacturer and export the same.
As per Foreign Trade policy (2015-20), Para 9.33 “Merchant Exporter” means a person engaged in trading activity and exporting or intending to export goods.
Merchant Exports in Pre-GST regime
In the pre-GST regime, the Merchant exporters were permitted to carry out the business of exports of goods after executing B-1 bond with Surety/security, before the Deputy/Assistant Commissioner (DC/AC) of Central Excise, having jurisdiction over the factory or warehouse or before the Maritime Commissioner at Mumbai, Chennai, Kolkata, Paradeep, Kandla, Tuticorin, Visakhapatnam and Cochin.
After execution of the bond, the Merchant exporter was required to obtain Form C.T-1 certificate from the said DC/AC for procuring the goods from a factory or warehouse without payment of tax for export. Form C.T-1 certificate contained the details of goods such as its price/value, quantity, specification, etc. Further, such certificates were supported by the purchase order.
Merchant exporters were required to submit such Certificate to the Manufacturer- Supplier as well as the jurisdictional Central Excise officer, with duly signed ARE-1 Form. The Superintendent of Central Excise, after due verification of export documents with such certificate, examined the export packages. Thereafter, they used to allow such goods for stuffing into the container and then sealed the container for onward dispatch to the port of shipment. Merchant exporters may opt for self-sealing of goods and examination at place of dispatch or at the port of exportation.
With regard to waiver of Central Sales Tax, the Merchant exporters were required to collect H-Form from the Sales Tax department and provide it to the Manufacturer Supplier for onward submission to the Sales tax authority.
Merchant Exporter in GST
The procedures relating to export have been simplified so as to do away with the paperwork. The earlier requirements of C.T-1 Bond and ARE-1 form have been done away within the GST regime. The shipping bill is the only document required to be filed with the Customs for making exports. The supplies made for export are to be made under self-sealing and self-certification without any intervention of the departmental officer.
The shipping bill filed with the Customs is treated as an application for refund of IGST and shall be deemed to have been filed after submission of export general manifest and furnishing of a valid return in Form GSTR- 3B by the applicant.
Just like a manufacturer exporter, a merchant exporter is also required to take GST registration and he is also ligible to sell goods with/without payment of IGST.
If he is exporting under bond/LUT then he can sell without payment of IGST and the unutilized credit can be availed as a refund.
Alternatively, if he can sell goods on payment of integrated tax (IGST) and claim a refund of integrated tax but in this case, he will not be able to take the special relief of procuring goods at 0.1% GST.
The conditions that need to be fulfilled for availing special relief:
- Supplier shall supply goods to the Merchant Exporter on the tax invoice.
- Merchant export shall export goods within 90 days from date of the tax invoice.
- Merchant Exporter shall mention supplier GST number and tax invoice number on shipping bill, bill of export, etc.
- Merchant Export shall get registration with an Export Promotion Council or a Commodity Board recognised by the Department of Commerce.
- Place PO on Supplier: – the registered recipient shall 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
- The registered merchant exporter shall move the said goods from place of registered supplier – (a) directly to the Port, Inland Container Depot, Airport or Land Customs Station from where the said goods are to be exported; or (b) directly to a registered warehouse from where the said goods shall be move to the Port, Inland Container Depot, Airport or Land Customs Station from where the said goods are to be exported;
- When goods have been exported, the registered recipient shall provide a 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
The registered supplier shall not be eligible for the above-reduced rate if the merchant exporter fails to export the said goods within a period of 90 days from the date of issue of the tax invoice.
In this regard it has been clarified that the benefit of the concessional rate is optional, i.e., the option may or may not be availed by the supplier and/or the recipient and the goods may be procured at the normal applicable tax rate. It has also been clarified vide Circular No. 37/11/2018-GST, dated 15.03.2018 that the exporter will be eligible to take ITC of the tax @0.1% paid by him. Further, the supplier who supplies the goods at the concessional rate is also eligible for a refund of the unutilised ITC on account of the inverted tax structure. The exporter of such goods can export the goods only under LUT /bond and cannot export on payment of IGST as per Rule 96(10) of the CGST Rules.
Here is the Timeline to receive GST Refund for the exporter.
Goods sent to Job Work
The goods sent by an exporter to a job worker are not a supply, as there is no transfer of title and no consideration for the goods are involved. In terms of section 143 of the CGST Act, 2017 a registered taxable person (the principal) may send any inputs or capital goods, without payment of GST, to a job worker for job work.