Can a merchant exporter procure goods from a Non Manufacturer?, Goods and Services Tax - GST

[Sukhpal Singh]

Dear All,

Can a merchant exporter procure goods from a person who is not a manufacturer but a trader and export it?

If yes, then it can still take benefit of the concessional rate of 0.1% as per Notification No. 40/2017 and 41/2017.

And if the concessional rate benefit is allowed then the trader can claim refund as per inverted duty structure rule?

Please guide with references (if any) ?

Posts / Replies

[Padmanathan Kollengode]

Can a merchant exporter procure goods from a person who is not a manufacturer but a trader and export it?

If yes, then it can still take benefit of the concessional rate of 0.1% as per Notification No. 40/2017 and 41/2017.

There is no restriction in Notification No 40/2017-CT(R) and 41/2017-IT(R) that merchant exporter has to procure goods from manufacturer to avail benefit of concessional rate of tax. Hence, merchant exporter procuring goods from trader may also avail benefit of concessional rate.

And if the concessional rate benefit is allowed then the trader can claim refund as per inverted duty structure rule?

In my opinion yes. Kindly refer to Circular 173/05/2022 which clarifies as under:

Accordingly, para 3.2 of the Circular No. 135/05/2020-GST dated 31.03.2020 stands substituted as under:

“3.2 It may be noted that refund of accumulated ITC in terms of clause (ii) of first proviso to sub-section (3) of section 54 of the CGST Act is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. It is noteworthy that, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the CGST Act.

3.3 There may however, be cases where though inputs and output goods are same but the output supplies are made under a concessional notification due to which the rate of tax on output supplies is less than the rate of tax on inputs. In such cases, as the rate of tax of output supply is less than the rate of tax on inputs at the same point of time due to supply of goods by the supplier under such concessional notification, the credit accumulated on account of the same is admissible for refund under the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the CGST Act, other than the cases where output supply is either Nil rated or fully exempted, and also provided that supply of such goods or services are not notified by the Government for their exclusion from refund of accumulated ITC under the said clause.”