Merchant export is a commonly used word under foreign trade. It is a technique of trading but is equally essential as any producer or manufacturer.
In simple words, a person who is involved in the exercise of merchant exports is known as a Merchant Exporter.
Merchant exports are commodities that an exporter does not manufacture on its own but instead buys it from a local supplier for exporting goods to the buyer.
Therefore, a merchant exporter is a person or individual who is engaged in the trading exercise and exporting or intending to export goods.
A merchant exporter is a company or an individual that obtains ready-made goods and items from a local supplier and then exports those products to the buyer directly.
They buy commodities from manufacturers and exporters and then ship them to foreign customers as they do not have their own manufacturing unit.
How Do Merchant Exporters Work?
Merchant exporters work the same as the manufacturer exporter. The difference between merchant exporter and manufacturer exporter is, unlike manufacturer exporter, the merchant exporters do not have to set up their manufacturing units.
The merchant exporters simply find and identify the supplier who manufactures the commodities and then sells the same directly to their potential overseas buyers.
After creating a strong network with their suppliers in the market, they look for buyers by adopting various digital marketing schemes like creating an informative website, email & social media campaigns, running pay-per-click campaigns on the internet to generate leads for their business or capital.
All these efforts help the merchant exporters to generate more leads and business for their capital.
The merchant exporter contacts his supplier to supply the required quantity of goods once he receives the sales order, which then the merchant exporter ships to his clients.
The commodities do not bear the name of the original supplier as merchant exporter sells it on their own name or brand.
Merchant Exporters In India
There are various merchant exporters that are currently running in India and contribute richly to the nation’s exports.
A merchant exporter has to get himself registered at the GST portal to avail all the benefits and incentives.
The government with time has introduced many schemes and incentives to promote this kind of trading export.
Merchant Exports Under GST
GST stands for the Goods and Service Tax, and all the operations concerning merchant exports have been made easy & simpler for the comfort of trading and import-export business and the redundancies have been ironed out.
In the past when the GST wasn’t introduced yet, it was compulsory to acquire the C.T1 bond and ARE-1 form.
But after the introduction of the GST, the government has removed both conditions under the new GST Regime.
To obtain a refund on the IGST the consigning bill filled with the customs office is considered as the de-facto application for the same. This makes the procedure flawless.
In the past, the merchant exporters needed to submit the Export General Manifest and provide a valid return in form GSTR-3B to avail any refund and concession under GST.
A merchant exporter can export commodities with or without paying IGST under GST, the same as in the case with a manufacturer exporter. The exporter has to register on the GST portal only.
There are two ways for merchant exporters to claim a refund under GST.
- The merchant exporters can either file a bond or a LUT ( Letter of Undertaking|) before exporting the commodities, and then claim their refund on the unused ITC (Input Tax Credits).
- The merchant exporters can claim a refund by paying the IGST during the time of export. In this situation, they do not have to file any bonds or LUT. However, if the merchant exporter chooses this route then they will lose their eligibility for the concessional 0.1% GST rates.
What Are The Conditions For Availing The Concession Rate Under GST?
The government of India provides a concessional of 0.1% GST rate to the merchant exporters who obtain commodities from the local supplier under the new GST. But in order to avail the benefits, they have to meet some of the specific conditions. And below are those conditions.
- The tax invoice for the acquired commodities should clearly state the Goods And Service Tax(GST) rate at 0.1%
- The goods should be exported within the span of 90 days of the issue of the tax invoice.
- The merchant exporter should be registered with an Export Promotion Council/Commodity Board in order to avail of the concession of 0.1% GST.
- The shipping bill should contain all the important details like the tax invoice number as well as the GST number.
- A copy of the purchase order should be provided to the jurisdictional tax officer of the supplier by the merchant exporter.
- A copy of the shipping bill, as well as the proof or EGM ( Export General Manifest) and export report upon the export of commodities, should be provided by the supplier and the jurisdictional tax officer.
- The commodities that have been exported should be moved to a place from where they should be transported directly to the port/Airport/LCS/ICD. From where they are to be sourced from different suppliers.
Documentation Processed By The Merchant Exporter
At times goods are collected from multiple suppliers & manufacturers and are first stored at a registered warehouse before being exported to a dry port/ICS or to a port. Under these circumstances, the merchant exporter is authorized to issue a recognition receipt of commodities to the jurisdictional tax officers and to the manufacturers.
Furthermore, if the merchant exporter wants to export excised commodities that are manufactured locally, he can execute B1 bonds for export.
Refund Process Under Merchant Exporter
- When a merchant exporter exports commodities without paying the tax amount. To obtain commodities at the concession rate of 0.1% and then claim a refund of the same: In the case, where a supplier supplies the commodities to the merchant exporter at the charging rate of 0.1% GST without paying the tax amount. The merchant exporter can redeem a refund of the unused ITC at the end of a tax period in case of goods involving an inverted structure or zero-rated goods according to the section 54(3) of the CGST Act.
- The exporter must provide a solid proof to clarify that they haven’t availed any benefits under MODVAT ( Modified Value Added Tax). Along with the declaration by the manufacturer in front of the officials. The exporter has to provide the manufacturer’s details in the shipping bill.
- When the exports are done with the payment of tax (IGST) where the supplier is supplying the commodities to a merchant exporter at a regular rate. In this case, where the merchant exporter decides to export commodities by paying the tax amount. The concessional tax rate on inputs cannot be availed.
In the above article, I’ve provided you with detailed knowledge on Merchant Exports | Meaning & Process Under GST. I hope you find this article helpful. For any query related to the topic, you can connect with us @Info@eximtradedata.com or visit site site:https://eximtradedata.com/