Merchant Exporters, Goods and Services Tax - GST

[Archna Gupta]

Dear Experts

Please clarify the queries mentioned below related to merchant exporters:

Q-1 If, an exporter, to meet its export order, partially exports from its own manufacturing unit and partly procures from another registered supplier whether manufacturer or retailer, will he qualify for concessional rate of GST?

Q-2 Whether registered supplier can be retailer also or he must be a manufacturer only to qualify for concessional rate of GST on supply made to merchant exporter?

Q-3 Can merchant exporter also supply goods in domestic market?

Q-4 Whether both options are available to merchant exporter for export of goods “on payment of IGST” or “under LUT”?

Q-5 Can merchant exporter

• claim ITC against domestic supplies (if he is allowed) or
• claim refund of ITC against zero rated supply under LUT (because he is exporting the goods under LUT) or
• claim refund of IGST (after adjusting ITC on purchase invoice at concessional rate of GST) against zero rated supply on the payment of IGST.

Posts / Replies

[YAGAY ANDSUN]

May this this Article (By: Praveen Nair) April 25, 2018 would help you out.

MERCHANT EXPORT PROCEDURE IN GST:

Notification No.: 40/2017-CENTRAL TAX (RATE), DATED 23.10.2017

(Similar Notification issued has been issued in UTGST, SGST & IGST Act, effective dated 23.10.2017)

||Whatever has been discussed hereinbelow, with reference to the Notification No., 40/2017-Central Tax (Rate), dated 23.10.2017, is fully applicable to the Registered Supplier and the Registered Recipient-Exporter (Merchant Exporter), covered under the Notification No., 41/2017-Integrated Tax (Rate), dated 23.10.2017, IGST Act, 2017 and Notification No., 40/2017-Union Territory Tax (Rate), dated 23.10.2017, UTGST Act, 2017. The Central Tax Notification No., 40/2017-Central Tax (Rate), dated 23.10.2017, is also applicable, under the SGST Act, 2017.||

"The Concessional Tax Rate of Inter State Transaction or Supply of Goods, under the said Notification, is 0.1% for IGST | The Concessional Tax Rate, in UTGST / SGST, is 0.05% CGST + 0.05% UTGST (SGST)"

While adopting this new Procedure, it is very much necessary that both the Registered Supplier and Registered Recipient-Exporter (Merchant Exporter), carefully follow the Procedure, prescribed under the said Notification, failing which, liability may arise.

1. This Procedure is only for export of Goods and not for export of pure Services
2. Both the Supplier, who may be a Manufacturer or a Trader and the Merchant Exporter, must be registered under the GST Law
3. The Merchant-Exporter, must hold a RCMC, that is, Registration-cum-Membership Certificate of appropriate Export Promotion Council or the Commodity Board else he would not be eligible for this Procedure
4. The Merchant Exporter, must necessarily place a Purchase Order, in writing, on the Registered Supplier, for procurement of the said Taxable Goods, at Concessional Rate, prescribed under the above mentioned Notification and a self-attested copy of Purchase Order, must be forwarded by the Merchant Exporter, to the Jurisdictional GST Officer of the Registered Supplier.
5. The Registered Supplier, shall supply the Taxable Goods, to the Merchant Exporter, by charging CGST, at the fixed Rate of 0.05% and SGST/UTGST, at the fixed Rate of 0.05%, in case of Intra-State Supply or Transaction of such Taxable Goods and 0.1% IGST, in case of Inter State Transaction, by covering the Supply, under the Tax Invoice, to be issued by the Registered Supplier, under Rule 46 of the CGST Rules, 2017.
6. Except the above, no other Tax, under the GST Law, is payable on Taxable Goods, involved in the aforestated Transactions.
7. The Registered Recipient-Exporter, who is situated in the same State or Union Territory, shall export the Taxable Goods, within the period of 90 days, from the date of Invoice of the Registered Supplier.
8. If, the Merchant Exporter, fails to export the said Taxable Goods, within the period of 90 days, from the date of Tax Invoice of the Registered Supplier, the Registered Supplier, shall not be eligible for the abovementioned Concessional Rate of 0.05% CGST + 0.05% SGST/UTGST or 0.1% IGST and therefore, the Registered Supplier, would be liable to pay off the balance amount of CGST and SGST/UTGST or IGST, applicable at appropriate rate, on the said goods, with Interest.
9. The Merchant Exporter, is not made responsible, for his failure to export the Taxable Goods, within the prescribed time-limit of 90 days but it is the Registered Supplier, who is liable to punishment, under this provision, for failure of the Merchant Exporter. Hence the Registered Supplier should continously follow-up with the Merchant Exporter for the Proof of Exports.
10. The Merchant Exporter, shall procure the Taxable Goods, from the place of Registered Supplier and dispatch directly, to the Port of Export, which can be Sea Port, Airport or Land Customs Station and through ICD,
11. Alternatively, the said Taxable Goods, can be sent to a Registered Warehouse, for temporary storage and from where, the said Taxable Goods, would be sent to the Port of Export. Different Consignments covered under different Tax Invoices, can be combined together for shipment at the Registered Warehouse.
12. If, Taxable Goods are initially stored in Registered Warehouse, the Merchant Exporter, will obtain an acknowledgement, from the Warehouse Operator and send a copy of the said acknowledgement, along with a copy of Tax Invoice, duly endorsed by him, for receipt of the Goods to;
    • The Registered Supplier &
    • The Jurisdictional GST Officer of the said Registered Supplier.
13. A copy of Shipping Bill or Airway Bill or Bill of Export, would be self-attested and supplied by the Merchant Exporter, to the Registered Supplier, with Proof of Export General Manifest. The said Documents would also be sent by the Merchant Exporter, to the Jurisdictional GST Officer of the Registered Supplier.
14. The Merchant Exporter, will have to incorporate GSTIN of the Registered Supplier, along with Tax Invoice No., & Date of the said Registered Supplier, in the Shipping Bill (or Airway Bill) or Bill of Export (Export by Road).
15. Notification No., 40/2017-Central Tax (Rate), dated 23.10.2017, also involves Intra-State Transaction, it cannot be taken as “Zero Rated Supply” and therefore, Refund of the Tax, in the form of 0.05% CGST + 0.05% SGST/UTGST or 0.1% IGST, would not be admissible as Refund, in the form of Rebate. Hence would be a Cost to the Merchant Exporter with no Input Tax Credit nor Refund/Rebate thereof.
16. Bond or Letter of Undertaking is not required, for the concession, granted to the extent of Normal Rate of Tax less the Concessional Rate of Tax.

• Note that there is no compulsion for the Registered Supplier and Merchant Exporter, to mandatorily follow the above mentioned notification. They can switch over to normal Procedure of export of Taxable Goods, without payment of IGST, under a Letter of Undertaking or Bond and claim of Refund of accumulated or unutilised Input Tax Credit or alternatively, IGST, at appropriate rate, can be paid on the Taxable Goods, with a Claim for Rebate of such Tax.
• It should also be noted that once this Procedure is opted for, by a Registered Supplier, it is not necessary that all Export Consignments, must be supplied under this Procedure

[Alkesh Jani]

Sir/Madam,

In this regards, I may limit myself for your question No.1, and rest question stands answered automatically.

1. A registered person can procure goods at concessional rate in terms of Notification No. 40/2017-CT (Rate) dated 23/10/2017. On going through the said Notification the proof of export is the shipping bill and EGM. If the goods so procured i.e. to say if HSN code will not match with the supply and the shipping bill the goods can be declared as “not exported” and litigation may arise. If the buyer is manufacturing the goods, then it can be assumed that characteristic and nature of goods may change and final product may not be of the same HSN therefore, the concessional rate benefit cannot be availed for manufacturing the goods to be exported.

Please refer previous issues also.

Our expert may correct me if mistaken.

[Praveen Nair]

Please consider amendmend to this article in Para 15.

Vide GST Circular No.37/11/2018 dated 15.03.2018, merchant exporter will be eligible to take credit of the tax @ 0.05%/0.1% paid by him.

[YAGAY and SUN]

Thanks for up-dating. 

[Kishan Barai]

Q-1 If, an exporter, to meet its export order, partially exports from its own manufacturing unit and partly procures from another registered supplier whether manufacturer or retailer, will he qualify for concessional rate of GST?

Ans : Yes

Q-2 Whether registered supplier can be retailer also or he must be a manufacturer only to qualify for concessional rate of GST on supply made to merchant exporter?

Ans : He can be retailer also

Q-3 Can merchant exporter also supply goods in domestic market?

Ans : Yea, he can also become domestic trader along with exporter, but GST refund would not be allowed in domestic trade. ITC would be available

Q-4 Whether both options are available to merchant exporter for export of goods “on payment of IGST” or “under LUT”?

Ans : Yea

Merchant exporter : True

• claim ITC against domestic supplies (if he is allowed) or
• claim refund of ITC against zero rated supply under LUT (because he is exporting the goods under LUT) or
• claim refund of IGST (after adjusting ITC on purchase invoice at concessional rate of GST) against zero rated supply on the payment of IGST.

[POLYPLEX CORPORATIONLTD.]

Can a Manufacture exporter sell goods on concessional rate under LUT?

If yes, then Where he can show in GSTR-1 & IN 3b?