Understanding Concessional Rates of GST for Merchant Exporters

Under GST law, goods, services, or both exports are considered zero-rated. This means that the export of goods or services and the supply to a Special Economic Zone developer or unit are included in the zero-rated supply. Registered persons who make zero-rated supplies have two options for claiming a refund. They can either supply goods under a bond or Letter of Undertaking (LUT) without paying IGST or claim a refund of unutilised input tax credit, or they can supply goods by paying IGST and claim a refund of the IGST paid on goods or services. The refund is granted under specific section 54 of the CGST Act and section 16 of the IGST Act. Additionally, Merchant Exporters, defined as persons engaged in trading activities and exporting or intending to export goods, can export goods directly either on payment of GST or without payment of GST. This article provides a detailed procedure for exporting through a Merchant and outlines the essential conditions that merchant exporters must meet to benefit.  

Two Methods for Procuring Goods

Merchant Exporters can purchase goods from a registered supplier at a concessional rate of 0.1% GST for export instead of paying the whole duty, provided specific conditions are met. This method also enables the merchant exporter to claim input tax credits. However, it is essential to note that exports of such goods must be under the Letter of Undertaking (LUT). Understanding the intricacies of these methods is crucial to merchant exporters as they navigate global trade.

Procuring Goods at Concessional Rates

The GST Council approved a GST rate of 0.10% for supplies to merchant exporters, and the Central Government issued notifications Nos. 40/2017 CGST and 41/2017-IGST, all dated 23.10.2017, to implement this decision. Merchant exporters can procure goods from suppliers for export at this concessional rate, subject to specific conditions outlined in the notifications. Adhering to these conditions is essential to benefit fully from this scheme.

Optional Scheme and Input Tax Credits

The benefit of supplies at a concessional rate is subject to certain conditions and is optional. If the supplier or recipient does not choose this option, the goods may be procured at the standard applicable rate. Additionally, the exporter can take credit for the CGST/IGST paid, and suppliers supplying goods at a concessional rate are eligible for refunds due to the inverted tax structure as per Section 54 of the CGST Act and CBIC Circular No. 37/11/2018-GST dated 15.03.2018.

Precautions and Conditions

The manufacturer supplier is a registered supplier under GST. He supplies goods to a merchant exporter, who is a registered recipient. The Merchant Exporter must register with GSTIN and the Export Promotion Council or a Commodity Board recognised by the Department of Commerce. Merchant exporters shall place an order with the registered supplier, and its copy must be provided to the jurisdictional tax officer of the registered supplier and clear the goods on payment of 0.10% IGST or 0.5% CGST and 0.5% SGST/UGST. Goods must be dispatched directly to the port from the registered place of the supplier or sent to a registered warehouse of the merchant exporter from where goods are sent to the port, ICD, or Airport or Land customs station from where goods are to be exported. In the case of goods required to be aggregated in the warehouse and then sent to port for export, the registered recipient endorses receipt of goods on the tax invoice and also an acknowledgement of receipt of goods in the registered warehouse and a copy must be submitted to the jurisdictional tax officer of the supplier. In the GST system, registered recipients and suppliers must meet the notification requirements when exporting goods. The shipping bill must include the name and GSTIN of the registered supplier, and other specific details must be declared in the shipping bill format. Merchant exporters must also fulfil crucial conditions when procuring supplies at a concessional GST rate of 0.10% for export. These conditions include exporting the goods within ninety days of issuing the tax invoice. In the event of failure to export within ninety days, as stated above, the exemption is not available to the exporter. After the export of goods, the merchant exporter must provide a copy of the shipping bill or bill of export containing details of the supplier's GSTIN and his tax invoice to the supplier with proof of filing an export general manifest or export report.

Refund Claim by Merchant Exporter

Merchant exporters can claim a refund of input tax credit per rule 89(4B) of the CGST Rules. The procedure is laid down in CBIC Circular No. 94/13/2019-GST, dated 28.03.2019.

Conclusion

In conclusion, understanding the intricacies of zero-rated supplies, concessional rates for merchant exporters, and the conditions for claiming refunds is essential for businesses engaged in international trade. Adhering to the specified procedures and conditions under the GST law is crucial for ensuring seamless export operations and maximising the benefits available to registered persons and merchant exporters. Compliance with the regulations and taking advantage of the available options can significantly contribute to the efficiency and success of global trade endeavours.