GST on Merchant Export Transactions


Merchant Export trade transactions include sale transaction by a supplier to the exporter of goods. Such exporter of goods is known as “Merchant Exporter”.

As per Foreign Trade Policy, “Merchant Exporter” means a person engaged in trading activity and exporting or intending to export goods.

Merchant exporter procures the material from a manufacturer and exports in his firm’s name. Merchant exporter procures the order from international market. Merchant exporter does not have own manufacturing unit or processing factory. Merchant Exporter can export the goods either directly from the premises of the manufacturer/supplier, with or without sealing of the export consignments, or through his premises “under bond/LUT“.

Merchant export transactions includes supply of goods and not the services.

At the time of implementation of GST, there was no specific incentive or any benefit being provided in law for merchant exports. At that time, tax was charged by suppliers at the same tax rates considering merchant exporters as normal recipients. On the demand of industry, CBIC through its notification CGST-R-40-2017 dtd 23/10/2017 brought a relief measure for merchant exporters so that capital of such exporters do not stuck in taxes and to reduce their financial burden.

In this relief measure, supplier selling goods to Merchant Exporter will charge tax @ 0.05% as CGST and 0.05% as SGST/UTGST or 0.1% as IGST of the taxable value, as the case may be instead of charging tax at normal rates of tax. This relief has been provided w.e.f. 23/10/2017.

However, such relief has been provided subject to following terms and conditions:-

(i) the registered supplier shall supply the goods to the registered recipient on a tax invoice;

(ii) the registered recipient shall export the said goods within a period of ninety days from the date of issue of a tax invoice by the registered supplier;

(iii) the registered recipient shall indicate the Goods and Services Tax Identification Number of the registered supplier and the tax invoice number issued by the registered supplier in respect of the said goods in the shipping bill or bill of export, as the case may be;

(iv) the registered recipient shall be registered with an Export Promotion Council or a Commodity Board recognised by the Department of Commerce;

(v) 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;

(vi) the registered recipient shall move the said goods from place of registered supplier –

(a) directly to the Port, Inland Container Deport, 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 Deport, Airport or Land Customs Station from where the said goods are to be exported;

(vii) if the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the registered recipient shall move goods to the Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported;

(viii) in case of situation referred to in condition (vii), the registered recipient shall endorse 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

(ix) 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.

The registered supplier shall not be eligible for the above mentioned relief if the registered recipient fails to export the said goods within a period of ninety days from the date of issue of tax invoice. And, then, such supplier is liable to pay tax at normal rate of tax under GST Rate Schedule.

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