GST

All about Merchant Exports under GST

All about Merchant Exports under GST

A significant percentage of merchant exporters effectively support India’s booming export industry. Governments have continuously adopted various initiatives and subsidies to support this vital export channel. Merchant exporters play an essential role in the trade sector. Due to the presence of merchant exporters, there is a smooth movement of goods across borders. Merchant exporters act as a bridge between the international markets and local markets and producers.

India has reached a very stage in terms of exports. Indian exports have increased by 13.84% in the year 2021-22, reaching 770.18 billion US dollars. In 2022-23, there was a growth of 6.03%, which is 447.46 billion US dollars. This is one of the highest rises seen in the export industry of India. This broke the record of the previous year in India.

What do you mean by Merchant Exports?

Merchant export, in simple terms, is an activity in trade wherein there is an export or intention to export goods. The export of goods is the main focal point of merchant exports instead of services. The only difference between a merchant exporter and a manufacturing exporter is that the former does not manufacture the exported goods. Thus, the merchant exporters are exempt from the requirement to establish manufacturing premises. A merchant exporter is an independent contractor or business that purchases finished goods from a supplier, locates a customer, and then exports the goods to the customer.

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Advantages of Merchant Exports

  • Businesses can rapidly explore and access various worldwide markets by using merchant exports without setting up production facilities overseas. This adaptability enables enterprises to exploit new consumer trends and industry developments worldwide.
  • The initial capital expenditure required is often cheaper than establishing and running manufacturing facilities internationally and carrying out merchant exports. Due to this cost-effectiveness, smaller companies can participate in international commerce and broaden their worldwide presence.
  • Merchant exporters’ intermediate function accelerates market access. Merchant exporters acquire ready-to-export goods by engaging with trustworthy producers, enabling swifter entrance into global markets and adaptability to altering demands.
  • In order to reward merchant exporters for their contribution to promoting international commerce, multiple countries provide incentives and perks for export. These incentives include tax perks, policies encouraging exports, and exclusive market access.

Merchant Export under GST

All the merchant exporters have to register under GST mandatorily. The merchant exporter should have a valid GSTIN to carry out the business. Merchant exporters are business owners with premises in India who carry out a supply of goods to consumers in the international market. According to India’s goods and services tax, this is treated as an inter-state supply. The government has implemented many schemes and initiatives, especially for merchant exports.

The GST rate for the suppliers is 0.1%. It is considered a zero-rate supply when the export of goods occurs by merchant exporters. A refund can also be claimed for the same.

Concessional Rates for Merchant Exports

  • There is only 0.1% GST charged for the purchase of goods from suppliers present domestically.
  • There should be an explicit mention of the GST 0.1% rate in the tax invoice.
  • The shipping bill should mandatorily consist of the supplier’s details, like the supplier tax invoice and the GSTIN number.
  • Within ninety days of the issue of the tax invoice, the export should take place.
  • The merchant exporters must be registered with a Commodity Board or an Export Promotion Council1.
  • A Bill of export/shipping bill copy is to be submitted on the export of the goods to the jurisdictional tax officer. Along with this, proof of export and EGM is also required to be submitted to the tax officer of the jurisdiction as well as the supplier.
  • The copy of the order, which is placed at the concessional rate, is also to be submitted to the tax officer of the respective jurisdiction.
  • No export of goods by a merchant exporter should occur without a bond/LUT.
  • The goods the merchant exporter buys from the supplier will be directly moved to the port, airport, or LCS for export. The same condition applies when the goods are purchased from several suppliers.
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Conclusion

In conclusion, merchant export holds a significant place in the GST regime of India. Understanding all the rules and regulations laid by GST in the context of merchant export is essential for merchant exporters. Merchant exports only deal in goods and not in services. Similar to ordinary exports, merchant export also generates foreign revenue. Merchant exports build a link between the local producers, and local market and the global market.

Frequently Asked Questions

  1. What is an export merchant?

    An export merchant is someone who deals with the export of goods or intends to deal with the export of goods. They directly buy goods from the manufacturing unit and sell them internationally.

  2. What is the GST rate for export?

    The GST is at 0.1% on exports. The concept of zero-rated supply is used.

  3. What is GST 0.1% on export?

    The 0.1% on export is only applied when the supplier and the recipient are registered for dealing in exports with responsible authorities.

  4. Is export under GST zero-rated?

    Yes, the export under GST is zero-rated. This means the exports are exempted from GST charges.

  5. Who pays GST on export?

    As there is no GST on exports, no one has to pay GST on exports.

  6. Is GST registration mandatory for export?

    Yes, GST registration is mandatory for exports in India.

  7. What documents are required for export GST?

    Invoice date and number
    • Details of supplier
    • Details of recipient
    • GUSTIN
    • Details about the goods
    • Export bill/invoice
    These are some of the documents required for exporting GST.

  8. How much is GST applicable on export?

    As the export is considered a zero-rated supply in India, no such GST applies to export. Only a 0.1% rate is applied.

  9. What is an example of an export merchant?

    Amazon is one of the best-known examples of an export merchant. There are many merchant export companies located in India.

  10. How to show merchant export in gstr1?

    You can fill Table 6A of the GSTR 1 with the export details to show merchant exports.

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References

  1. https://commerce.gov.in/useful-links/export-promotion-councils/

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