Merchant Export: Understanding GST Registration and Process

Merchant Export refers to the activity in which a trader, known as a Merchant Exporter, purchases goods from registered suppliers in India and exports them to customers outside the country. Unlike manufacturers, Merchant Exporters do not have their own manufacturing units; instead, they procure goods from manufacturers or traders and ship them to foreign destinations. In the context of Goods and Services Tax (GST), a taxable supply is defined under Section 2(108) as the supply of goods or services or both that are subject to taxation. Similarly, Section 7(5) of the Integrated Goods and Services Tax (IGST) Act states that if a supplier is located in India but the place of supply is outside India, it is considered an inter-state supply. This indicates that Merchant Exporters are required to register for GST as they are based in India and engage in supplying goods to locations outside the country.

Conditions and Process: Let's consider an example of M/s ABC as a Merchant Exporter. Here are the conditions and process involved in Merchant Export:

1. Registered Supplier: The supplier from whom M/s ABC purchases goods must be registered under GST.

2. Eligibility of Merchant Exporter: M/s ABC, as a registered recipient or Merchant Exporter, must have a valid Goods and Services Tax Identification Number (GSTIN) and be affiliated with an Export Promotion Council or Commodity Board recognized by the Department of Commerce.

3. Placing Order: M/s ABC should place an order with the registered supplier, indicating that the goods are meant for export. A copy of this order should be provided to the jurisdictional tax officer of the registered supplier.

4. Tax Invoice: The registered supplier will raise a tax invoice for the goods, charging 0.1% IGST or 0.05% CGST plus 0.5% SGST/UTGST.

5. Movement of Goods: M/s ABC, as the registered recipient, will move the goods from the registered supplier's location to the port, ICD (Inland Container Depot), airport, or land customs station from where the goods will be exported. Alternatively, the goods can be sent to a registered warehouse, which can then dispatch them to the export location. In such cases, M/s ABC must endorse the receipt of goods on the tax invoice and provide an acknowledgment of receipt in the registered warehouse to the registered supplier and the jurisdictional tax officer.

6. Export within 90 Days: M/s ABC is required to export the goods within 90 days from the date of the tax invoice issued by the registered supplier. Failure to export within this timeframe will result in the exemption being withdrawn, and the registered supplier will have to pay the full tax along with interest.

7. Shipping Documentation: M/s ABC must indicate the GSTIN of the supplier and the tax invoice number in the shipping bill or bill of export.

8. Submission of Documents: After export, M/s ABC must provide a copy of the shipping bill or bill of export, along with the export general manifest (EGM) or export report, to the jurisdictional tax officer of the registered supplier.

ITC Availment: The Merchant Exporter, M/s ABC, can claim Input Tax Credit (ITC) on the tax paid by the supplier (Supplier of M/s ABC), which is 0.05% or 0.1% depending on the applicable tax rate.

Refund Claim by Merchant Exporter: As per rule 89(4B) of the CGST Rules 2017, the Merchant Exporter (M/s ABC) can claim a refund of the Input Tax Credit.

References: This information is sourced from the following references:

• Notification Nos. 40/2017-CT (Rate), 41/2017-IT (Rate), and 40/2017-UTT (Rate) dated 23-10-2017.
• Central Board of Indirect Taxes and Customs (CBIC) Circular No. 37/11/2018-GST dated 15-3-2018, regarding ITC available to Merchant Exporter (Sl. No. 13).
• FAQ on GST by CBIC, Chapter 14, from Question 78 onwards.
• CBIC Circular No. 94/13/2019-GST dated 28-3-2019, explaining the Export Refund Process.

CA Yaman Garg